Are Income Driven Repayment Plans a Scam for Federal Student Loans?


Dear Steve,

Hey there.

I’m eligible for Income based student loan repayment of $0, but I can’t find anything that actually tells me what that means when I’m not paying any money towards the loans. Right now I’m paying around $70 a month, so what’s the catch of $0?



Dear Melissa,

The income driven repayment plans are supposed to give people some breathing room when they can’t afford their regular payment. If you are enrolled in such a program your payment can be as low as $0 per month without going into default.

However, these programs come with consequences. Depending on what income driven repayment option you select the interest that would have had to pay each month will instead build separately. If you fail to file your annual recertification for the special payment all that growing interest can be added to your loan balance and make the total amount you owe, much higher.

I would suggest you read Why Income Based Student Loan Payments Can Be a Terrible Trap to better understand the pitfalls of this repayment option.

In addition to the consequences described above, if you don’t recertify your income by the annual deadline under the REPAYE, PAYE, and IBR plans, any unpaid interest will be capitalized (added to the principal balance of your loans). This will increase the total cost of your loans over time, because you will then pay interest on the increased loan principal balance. – Source

The fastest way to repay your student loan is going to be on the standard 10-year repayment option or faster than that. All extended programs will make the overall cost of your loan much higher overall by adding more interest created over an extended period of time.

You can learn more about the income driven programs by clicking here.


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Steve Rhode
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