Quick Answer: Parent PLUS loan borrowers experiencing payment increases should know that consolidated Parent PLUS loans only qualify for Income Contingent Repayment (ICR), not Income-Based Repayment (IBR). ICR payments can be twice as high as IBR, but borrowers remain eligible for Public Service Loan Forgiveness after making 120 qualifying payments.
Question:
Dear Steve,
Around 2002/2003 I took my first of 5, (I believe 5) parent student loans. I am a public servant and some of the loans were private. I applied for the loan forgiveness program and Fedloan is my servicing loan provider.
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They advised me to consolidate the loans to qualify for the IBR payment plan. My loan total is about $80,000.00. Based on my income my payment was $315, very affordable and my children were making the payments. Now, they sent me an email saying that I do not qualify for IBR and they changed the loan to ICR with a payment of $552 which will go up to $900 something.
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I can’t afford neither of those amounts, my daughter just got laid off from work and my son is going to school again using his GI bill.
I don’t know what to do, I need some advice.
Need advice on what can I do to get a lower and affordable monthly payment on my loans
Z
Answer:
Dear Z,
Well it appears the servicer screwed up by putting you in the IBR program to begin with. A consolidated Parent Plus loan is not eligible for the IBR but is eligible for the ICR. The good news is you will now be eligible for the Pubic Service Loan Forgiveness program after you have made 120 on-time and full payments under IBR or ICR.
See The Best Way to Lower Parent PLUS Loan Payments for more information.
You can use the online payment estimator tool, here to determine what your payment should be.
But payments under the ICR plan are up to twice as high as under the IBR repayment plan. Under the Income Contingent Repayment (ICR) plan your payment should be 20 percent of your discretionary income. Discretionary income for ICR plans is defined as “the difference between your income and 100 percent of the poverty guideline for your family size and state of residence.” It’s not really the money left over after your discretionary expenses.
You can find the poverty rate if you click here.
Now, all that being said, none of this applies to any private student loan you took out. Private loans offer no income contingent repayment program nor any public service loan forgiveness like federal loans do. For those private student loans, there is little to no hope for anything but making the payment or defaulting and hoping for a better solution.
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