Traditional and Income-Driven Repayment Plans
There are two types of repayment plans for federal student loans They offer flexibility for managing your payments during residency and post-residency. The repayment plan that is best for you will depend upon your repayment goals and your financial goals. Repayment plans can be broken into two types of plans: traditional repayment plans and income-driven repayment plans.
Traditional Repayment Plans
These plans base a borrower’s monthly payment on the amount borrowed and the repayment term associated with the plan. With these plans, the borrower repays the same monthly payment amount over a specific period (or term). Traditional repayment plans include Standard, Extended, and Graduated plans.
Income-Driven Repayment (IDR) Plans
These plans generally offer affordable monthly payments because payments are based on discretionary income and family size; however, the affordability of these plans can lead to higher overall costs and longer repayment timeframes.
These plans generally offer affordable monthly payments because payments are based on discretionary income and family size. With IDR plans, borrowers are required to submit income and household size information to their servicer annually, and the borrower’s monthly payment amount will be adjusted every year based on the updated information.
View all federal student loan repayment options at www.studentaid.gov.
Forgiveness is available with the income-driven repayment plans. If a borrower reaches the end of the IDR term and still has a loan balance, the remaining loan balance is forgiven; however, the amount forgiven is considered taxable income when filing a federal income tax return.
All IDR plans are eligible repayment plans for the federal Public Service Loan Forgiveness (PSLF) program. PSLF offers loan forgiveness for borrowers who meet all program eligibility requirements which include having Direct Loans, making required loan payments while enrolled in a qualifying repayment plan and while working full-time for an eligible employer. The primary difference between forgiveness through an IDR plan vs. forgiveness through the federal PSLF program is that the amount forgiven through the PSLF program is currently non-taxable.