Exciting news for student loan borrowers! Starting this December, two additional student loan repayment options—Pay-As-You-Earn (PAYE) and Income-Contingent Repayment (ICR)—will be available, providing relief for borrowers amid uncertainty surrounding the Biden Administration’s Saving on a Valuable Education (SAVE) plan.
Here’s what you need to know about these revived repayment plans and how they might help you reduce or even eliminate your student debt.
PAYE and ICR Plans
The Biden Administration is reinstating the PAYE and ICR repayment plans, both of which had been phased out under the broader SAVE plan. With SAVE facing legal challenges, the Department of Education (DOE) is offering these plans as interim solutions to ensure borrowers have options to manage their debt.
- PAYE (Pay-As-You-Earn): Designed for borrowers demonstrating financial need, PAYE offers lower monthly payments based on income and family size.
- ICR (Income-Contingent Repayment): Provides flexibility by calculating payments based on income, family size, and loan balance.
These plans are especially beneficial for borrowers seeking manageable payments or those pursuing Public Service Loan Forgiveness.
How PAYE and ICR Work
The PAYE plan caps monthly payments at 10% of discretionary income and forgives the remaining balance after 20 years of qualifying payments.
Eligibility Criteria:
- Must be a “new borrower” with no outstanding balance on a Direct or FFEL Loan as of October 1, 2007.
- Must have received a disbursement of a Direct Loan on or after October 1, 2011.
- Eligible loan types:
- Direct Subsidized and Unsubsidized Loans
- Direct PLUS Loans (for students)
- Direct Consolidation Loans (excluding parent PLUS loans)
ICR Plan
The ICR plan allows payments of 20% of discretionary income or the amount you’d pay on a fixed 12-year repayment plan adjusted for income, whichever is lower. Remaining balances are forgiven after 25 years.
Eligibility Criteria:
- Any Direct Loan borrower with eligible loan types.
- Parent PLUS loans are eligible only if consolidated into a Direct Consolidation Loan.
Biden’s Impact
Since taking office, President Biden’s Department of Education has forgiven over $175 billion in student loans, benefiting around 5 million borrowers. By reinstating PAYE and ICR, the Administration ensures continuity for borrowers as the SAVE plan remains under litigation.
Enrollment Timeline
While PAYE and ICR will reopen in December 2023, new enrollments for these plans will cease after July 1, 2024. Borrowers who apply before the deadline but whose applications are still being processed will remain eligible.
How to Apply
- Visit the Federal Student Aid website.
- Log in with your FSA ID.
- Navigate to the repayment plan options and select PAYE or ICR.
- Provide income and family size documentation as required.
For parent PLUS borrowers, consolidation into a Direct Consolidation Loan is necessary to qualify for ICR.
The revival of PAYE and ICR gives student loan borrowers renewed opportunities to manage their debt. These plans offer flexible payment structures, forgiveness options, and pathways to financial stability. If you’re eligible, consider applying before July 1, 2024, to secure the benefits of these programs.
Stay informed about your repayment options and check updates on the Federal Student Aid website for further details.
FAQs
What are the PAYE and ICR plans?
PAYE offers lower payments for financial need; ICR adjusts payments by income and family size.
Who qualifies for PAYE?
New borrowers with loans after October 1, 2011, are eligible for PAYE.
How does ICR work for parent PLUS loans?
Parent PLUS loans qualify for ICR if consolidated into a Direct Consolidation Loan.
When do PAYE and ICR enrollment reopen?
Enrollment reopens in December 2023.
When will PAYE and ICR close to new applicants?
Enrollment ends after July 1, 2024.
