Refinancing with Laurel Road
Refinancing rates from 1.89% APR. Checking your rates won’t affect your credit score.
If your student loan bills are devouring a big chunk of your paycheck, an income-driven repayment plan could bring you relief, lowering your monthly payment to something much more affordable.
But with four different income-driven repayment plans to choose from, how do you know which is the best for your situation?
After all, at first glance, they look remarkably similar.
But while these plans share a lot of similarities, they also have some key differences that could make a major impact on how much you pay each month.
Here are some tips on choosing the best income-driven repayment plan for you, depending on your individual circumstances.
To find out which might be the best fit, click on the link below if …
… you want the lowest monthly payment
… you borrowed loans after Oct. 1, 2011
… you borrowed loans after July 1, 2014
… you expect your income to increase significantly over time
… you’re married and file taxes together with your spouse
… one or more of your loans was used for graduate school
… you have a Parent Plus loan
Income-driven plans adjust your monthly payments based on your income and family size. To calculator your monthly payment, most plans look at your discretionary income, which is defined as the difference between your overall income and 150% of the federal poverty guideline.
For example, the 150% guideline for a single person in 2019 is $18,735. So, if you make $30,000, your discretionary income would be $11,265. On an income-driven plan, your payment would be capped at 10%, 15%, or 20% of that total, or between $1,127 and $2,253.
If you’re looking for the lowest monthly payment, PAYE or REPAYE could be your best options, since they cap your bills at 10% of your income. IBR could also reduce your payment to 10%, but only if you were a new borrower on or after July 1, 2014.
While this consideration still leaves you with several options, it’s a good place to start. What’s more, Federal Student Aid can help you find a plan with the lowest payment when you submit your application.
When you fill out your application, you can choose “I want the income-driven repayment plan with the lowest monthly payment” so the system can choose the right plan for you. But if you want to understand why one plan stands out over another, read on to learn about more important differences among the income-driven repayment plans.
Although the PAYE plan, along with REPAYE and IBR, can reduce your payments to just 10% of your discretionary income, you can only qualify if you borrowed student loans at the right time.
To be eligible for PAYE, you can’t have had an outstanding balance on a Direct or FFEL loan on or after Oct. 1, 2007. And your current Direct loans must have been disbursed on or after Oct. 1, 2011. If you received loans before this date, you can’t qualify for PAYE.
So if you’re a relatively new borrower, PAYE could be the best income-driven repayment plan for you, as it lowers your monthly payment to 10% and caps your repayment term at 20 years. (Some of the other plans go up to 25).
But if your loans are older, you’ll probably gravitate toward one of the other income-driven plans instead.
In addition to October 2011, you should also pay attention to a second date: July 1, 2014. The IBR plan also considers when you borrowed your student loans, and if you borrowed after this date, your payment will be capped at 10%, with a repayment term of 20 years.
But unfortunately, if your student loans predate July 1, 2014, your monthly bill will be 15% of your income. What’s more, your term will span 25 years, leaving you in debt for an additional five years before you see any loan forgiveness.
So not only will you have more the pay each month compared to a post-2014 borrower, but you’ll pay extra interest since you’ll be in debt for five additional years. If your loans are pre-2014, then PAYE or REPAYE would likely save you more money than an IBR.
While you should consider which is the best income-driven plan for saving money today, it’s also important to look into your financial future.
Most plans require you to recertify your eligibility on an annual basis, and they adjust your payments if your income or family size changes.
If your family grows but your income stays the same, for example, your payment might go down. But if the opposite happens and you start making more money, your monthly payment could increase as a result.
On the REPAYE plan, your monthly payment could increase without limit. If your income suddenly doubles, your student loan bill could do the same. In fact, you could even end up paying more on this plan than you would under the standard 10-year plan.
But PAYE and IBR don’t let this happen, because they have a built-in cap to your monthly payment. No matter how much your income grows, your monthly payments will never exceed the amount you would pay on the standard 10-year plan.
These plans can be especially helpful for doctors, who make a relatively low salary while in residency but then see a big jump in income as they move further along in their career path. If you expect to see your income rise in the future and want to keep your student loan payments low, PAYE or IBR would likely be a better option than REPAYE.
When choosing the best income-driven repayment plan, another consideration is your marital status. The REPAYE plan takes both your and your spouse’s income into account when you apply. Combining incomes could mean your student loan bill gets a lot higher.
But PAYE and IBR don’t take spousal income into account, so your payment will remain based on your income, and only your income. If you file taxes with a spouse but don’t want your student loan plan to be based on two incomes, opt for the PAYE or IBR plan rather than REPAYE.
If you’ve still got a balance left over after 20 or 25 years on an income-driven repayment plan, the remainder may be forgiven. You’ll have to pay taxes on the forgiven amount, but otherwise you can kiss that student loan debt goodbye.
However, the amount of time until your loans are forgiven could vary depending on whether they were used for your undergraduate education or for graduate school. If you have even one graduate school loan, your terms on REPAYE increase to 25 years, rather than the 20-year term for undergraduate loans.
So before choosing REPAYE, consider what you used your loans for. If they were graduate school student loans, REPAYE would switch from being one of the most affordable options to one of the more expensive ones. In this case, you might want to look at PAYE or IBR instead.
If you’re looking to put a Parent Plus loan on income-driven repayment, your choice is easy: Pick the ICR plan. That’s because ICR is the only plan that Parent PLUS loans qualify for — and you have to consolidate them first.
To make your Parent Plus loan eligible for ICR, you first must apply for Direct Loan Consolidation. Then you can choose the ICR plan, which adjusts your bill to 20% of your discretionary income and offers loan forgiveness after 25 years of on-time repayment.
Finding the best income-driven repayment plan for you
So, which is the best income-driven repayment plan? For most borrowers, REPAYE, PAYE, or IBR are better options than ICR, since they could give you lower monthly payments.
And PAYE seems to have a slight edge over REPAYE and IBR, since it lowers your payments to 10% and sets your term at 20 years, rather than 25. But to qualify for PAYE, you must be a relatively new borrower. Those with older student loans could do better with another plan.
Whatever you choose, remember that you must recertify your eligibility every year to stay on the plan. At this time, you can also switch to a different income-driven plan if your current one no longer meets your needs.
At the same time, don’t forget that lowering your bills and extending your terms means you pay more interest in the long run. Although an income-driven plan could save your finances today, you might consider other strategies for paying off your debt in the future.
Before restructuring your debt, use our income-based repayment calculator to estimate exactly what your new repayment plan will cost. By crunching the numbers, you’ll have a clear sense of the short- and long-term effects of changing your student loan repayment plan.
Interested in refinancing student loans?Here are the top 6 lenders of 2020!
|Lender||Variable APR||Eligible Degrees|
|1.99% – 5.64%1||Undergrad & Graduate|
|1.89% – 5.90%2||Undergrad & Graduate|
|2.25% – 6.09%3||Undergrad & Graduate|
|1.89% – 6.77%4||Undergrad & Graduate|
|2.39% – 6.01%||Undergrad |
|1.99% – 5.41%5||Undergrad & Graduate|
|Check out the testimonials and our in-depth reviews! |
1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 2.98% APR (with Auto Pay) to 5.79% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.64% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of July 31, 2020, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 7/31/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of September 9, 2020. Information and rates are subject to change without notice.
3 Important Disclosures for SoFi.
4 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount.
The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.
To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of September 10, 2020.
5 Important Disclosures for CommonBond.
Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.16% effective August 10, 2020.