Federal Student Loans – Repayment Plans for Financial Hardship

Borrowers whose income is low or unstable, or who have low to moderate income with very high student loan debt may be eligible for certain Repayment Plans for Financial Hardship.

These repayment plans include:

• Income Contingent Repayment Plan (ICRP)
• Income Sensitive Repayment Plan (ISRP)
• Income Based Repayment Plan (IBRP)
• Hardship Repayment Plans for Perkins Loans

If you have a Federal Direct Loan, except for PLUS loans, you can choose an income contingent repayment plan. Payments on this type of plan can be as low as $0-5 per month. However, if your payment is lower than the accrued interest each month, the loan principal will continue to increase. After 25 years, the government will cancel the remaining balance on this type of loan, and the IRS will treat the canceled debt as income.

If you have a FFEL loan, you could qualify for an income-sensitive repayment plan. These plans base your payments on your annual income, family size, and total loan amount. Payments must cover at least the accruing interest and the loan must be paid off in ten years.

People with Direct loans and/or FFELs are eligible for income based repayment plans.  You cannot qualify for an IBRP if you are in default. These plans offer more flexible options than ICRP and ISRP plans, and your debt is eliminated after 25 years of payments. Payments can be less than the accruing interest.

 If you have a Perkins loan, your payments must be at least $40 per month. However, the school may extend repayment for another ten years, or allow additional extensions for people with prolonged illnesses or unemployment.

Contact your loan provider for further information about Hardship payment plans. If you would like to speak to an experienced attorney with regard to student loans contact R. Richard Croce, LLC.
Richard Croce - Rich@rrc-llc.com