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Latest from FSA: How to Make Student Loan Payments Based on Income

July 25, 2014

Borrowers can base their payment amounts on how much money they make with income-driven repayment plans.  There are three different income-driven repayment plans available for those with federal student loans:

How are monthly payments calculated with income-driven repayment plans?

  • Depending on the plan, borrowers’ monthly payments could be 10%, 15%, or another percentage of their discretionary income and should be something they can afford.

How does student loan forgiveness work under income-driven repayment plans?

  • Income-driven repayment plans have a repayment period, 20 or 25 years. If a borrowers’ loan is not paid off by the end of their repayment period, the remaining balance will be forgiven.


  • If borrowers receive loan forgiveness under an income-driven repayment plan, it may be considered taxable income by the Internal Revenue Service.
  • In order to be eligible for the Income-Based and Pay As You Earn Repayment plans, borrowers must meet the criteria to see whether they “need” to enter the plan.
  • These plans are only available for federal student loans—loans made under the Direct Loan and Federal Family Education Loan Programs, to be specific.
  • If a borrower is married, how they file their federal income tax return makes a difference.

How borrowers can apply:

  • They can use the Repayment Estimator to figure out their eligibility and payment amount for an income-driven repayment plan.
  • If borrowers still have questions, they can call their loan servicer.
  • Borrowers can apply online at
    • They should check the box that allows their loan servicer to put them on the income-driven repayment plan with the lowest monthly payment amount.

View the full article here:


Megan Freese, Communications Intern

Megan Freese, Communications Intern

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