The details of how the monthly income-driven payments work vary. Here, we’ll give a brief overview of how these programs work before focusing specifically on how you can get your student loan balance forgiven with each of the four plans.
Warning: With each of these federal income-driven repayment plans, any forgiven balance is considered taxable income in the year it’s forgiven. You’ll need to plan ahead accordingly.
Pay As You Earn (PAYE)
The PAYE and REPAYE programs both limit your monthly payment amount to 10% of your discretionary income and require you to certify your income and family size every year. The nitty-gritty details of who is eligible and how the PAYE and REPAYE programs work from there vary.
Here’s how you can get your student loans forgiven if you’re enrolled in these programs:
If you’re in the PAYE program, your Federal Direct or Consolidation loans will be forgiven after 20 years. If you’re in the REPAYE program, it works a bit differently: Your student loans will be forgiven after 20 years, but only if all of your loans are from undergraduate study. If you went to grad school and took out any student loans, your remaining balance would instead be forgiven after 25 years.