Ontario Student Loans Repayment Lawyers
College tuition has gotten out of hand in the past decade. Americans have more than $1 trillion in student loan debt. On average, each borrower has nearly $29,000 in debt. Many have much more.
Many people struggle to repay student loans once they graduate college. They do not always get the high-paying job they desire. Many continue to work in low-wage jobs, barely struggling to get by.
If your federal student loan payments are high compared to your income, you may want to consider an income-driven repayment plan. Most federal student loans are eligible for an income-driven repayment plan. One of them is called the income-based repayment plan.
If your income is low enough, your student loan payment could be as low as $0 per month. Wouldn’t that be nice?
There are many resources online to help you reduce your student loan payments, but the Ontario student loans repayment lawyers at Wadhwani & Shanfeld can give you personalized advice. We can help you save money. Schedule a consultation today.
Income-Based Repayment
If you have a federal student loan, you may qualify for an income-based repayment plan rather than a high monthly rate. Under this plan, 10% of your discretionary income will go toward your repayment if you’re a new borrower on or after July 1, 2014. If you’re not a new borrower on or after this date, the amount is increased to 15% of your discretionary income. However, if you’re a new borrower, you get a 20-year repayment plan vs. 25 years for those who are not new borrowers.
If your federal student loans aren’t fully repaid at the end of the repayment period, the remaining balance is automatically forgiven. Periods of economic hardship deferment and periods when your required payment is zero will still count toward your total repayment period.
Keep in mind that the income-based repayment plan has an eligibility requirement. To qualify, the payment you would be required to make under the income-based repayment plan (based on your income and family size) must be less than what you would pay under the Standard Repayment Plan with a 10-year repayment period. You’ll meet this requirement if your federal student loan debt is higher than your annual discretionary income or is a significant portion of your annual income.
Note that your required monthly payment amount may increase or decrease based on your income or family size. You must recertify your income and family size every year.
Income-Contingent Repayment
We all struggle with finances from time to time. Most of us have some sort of debt that we’re constantly carrying around. For some people, it’s credit card bills. For others, it’s student loan debt.
Going to college is a goal for many people, but the high cost often makes it unattainable. In order to pay tuition, many people opt for student loans. However, student loans are unsecured debt, so the rates can be high. Plus, the cost of tuition for some private schools for four years can go into the six figures. With these factors in mind, no wonder many college graduates have trouble paying off their debt.
Don’t despair. The Ontario income-contingent repayment lawyers at Wadhwani & Shanfeld can help you understand your options for paying down debt. Schedule a consultation today to learn more.
What is an Income-Contingent Repayment Plan?
The income-contingent repayment plan is a repayment plan with monthly payments that are the lesser of:
- What you would pay on a repayment plan with a fixed monthly payment over 12 years, adjusted based on your income; or
- 20% of your discretionary income, divided by 12.
The following loans are eligible for this plan:
- Direct Subsidized Loans
- Direct Unsubsidized Loans
- Direct Consolidation Loans
- Direct PLUS Loans (for graduate or professional students)
Income-driven repayment plans aim to lower your federal student loan payments. However, keep in mind that making lower payments or extending your repayment period will cause you to pay more in interest over time.
Under the income-contingent repayment plan, your payment is always based on your income and family size. This can be good if your income is low. If your income substantially increases over time, your payment may be higher than the amount you would have to pay under the 10-year Standard Repayment Plan.
Pros and Cons of an Income-Contingent Repayment Plan
An income-contingent repayment plan has several benefits:
- Payments are capped at 20% of discretionary income. Student loan payments are more affordable, reducing the risk of default.
- The result is a lower monthly payment, which can also make it easier to accomplish other financial goals.
- The loans could be partially forgiven. You will need to make payments based on your annual income for 25 years. If there is still a remaining balance due after the end of this repayment period, that balance will be forgiven.
However, there are several downsides to consider as well:
- The plan is the most expensive of the income-driven plans, since the 20% cap is higher than other plans have.
- The loan repayment period is the longest, at 25 years.
- The payment amount may not be much different, resulting in little savings.
Pay As You Earn Repayment
Many recent college graduates are struggling as they enter the real world. They are busy trying to start a career. They have a lot going on and one thing they must often deal with is repaying their student loan.
Student loan payment amounts can be disproportionately high, especially if you’re not earning too much income right away. The good news is that you are not stuck with your current repayment plan.
There are many income-driven loan repayment plans to choose from. They lower your monthly payment based on income. One repayment plan to consider is the Pay As You Earn (PAYE) plan. This plan has monthly payments that are generally equal to 10% of your discretionary income. They are never more than the 10-year Standard Repayment amount, so this gives you more money at the end of the month. You’ll likely qualify for a pay as you earn repayment plan if you can’t afford your payments and didn’t start college until at least 2007.
Interested in learning more? Contact the team at Wadhwani & Shanfeld. Our Ontario student loans lawyers can assess your situation and help you find the best payment plan to fit your needs.
Should I Get the PAYE Plan?
PAYE is usually the best income-driven repayment plan if any of the following instances apply:
- You don’t expect your income to increase much over time.
- You’re married, and you and your spouse both have incomes.
- You have debt from grad school.
All income-driven plans share some similarities. For example, each caps payments to between 10% and 20% of your discretionary income. They also forgive your remaining loan balance after 20 or 25 years of payments. The PAYE option caps payments at 10% of your discretionary income and forgives your remaining loan balance after 20 years.
However, PAYE has the strictest requirements of all the income-driven plans. To qualify, you must demonstrate a partial financial hardship. This means you cannot afford the standard repayment amount. The standard repayment plan helps you get out of debt the fastest, as it lasts just 10 years. You make 120 payments, which are all the same amount every month. However, depending on the amount of student loan debt you have, the monthly payment can be high and even unaffordable.
If you have a financial hardship, you must also meet two borrowing guidelines for PAYE:
- You must have received a direct loan on or after October 1, 2007, and had no outstanding federal loans at that time.
- You must have received a direct loan disbursement on or after October 1, 2011.
Contact Wadhwani & Shanfeld Today
Student loans can be hard to pay back when you have many other expenses to deal with. An income-based plan can help you get manageable payments based on your income and what you can afford.
Interested in this type of payment plan? An Ontario income-based repayment lawyer at Wadhwani & Shanfeld can answer your questions and get you signed up. To get started, call (800) 996-9932 and schedule a consultation.
