A Guide for Income-Driven Repayment Plans and Their Eligibility

Posted by Garith Bell on February 6th, 2025

An income-driven repayment plan is an option that is being provided by the banks in the United States where a person can choose to pay out their student debt based on the earnings they are earning in their profession.

In this category, one can find that the income one is making from a job allows one to sustain oneself and also pay off the loans that one can find suitable for the repayment option. For a person who is making a high salary, it’s a standard procedure to consider that those individuals will pay higher monthly payments. Through that, they can continue the repayment of the student debt.

The Role of Income-Driven Repayment Plans

The income-driven repayment plans allow a person to go through the student loan option and follow the repayment plan where they can choose the amount to be repaid depending on the income, size of the family, and the discretionary spending people make from the income.

After graduation, the borrowers automatically get registered to the repayment program after the sixth month of the grace period. However, one can enroll in the income-driven repayment program depending on their current income and the plans one can get available for them.

DSA’s full form is Direct Selling Agents, and they are the ones who can help the students in India with the student loan option. Here, the lenders can choose the option of IDR, which keeps the asset under the performing assets of the lender, and that will also allow the students to pay the loans on time.

The IDR Procedure and How It Works

The IDR procedure works based on the variety as it allows a person to choose the amount to be paid as a repayment option based on the discretionary income of the person. For example, depending on the total salary here one needs to choose between 5% to 20%, where one can choose to pay depending on the income.

Based on the monthly payment towards the loan one can choose the loan tenure where they might have to complete the loan after 20 to 25 years. Now, this plan is based on the capital a person has taken for higher education, and based on that, one can choose the repayment option after calculating the interest on top of that.

Different Criteria for the Repayment Plan for Students

In the US, the banks generally provide four options. “Saving on a Valuable Education (SAVE) Plan,” “Pay As You Earn Repayment (PAYE) Plan,” “Income-Based Repayment (IBR) Plan,” and “Income-Contingent Repayment (ICR).”

These options change based on the education programs where one can make monthly payments between 10% to 5%. The undergraduate borrowers are the ones where one can get the chance to pay between those figures as the loan repayment option.

In India, there are DSA partner apps where one can find agents who can guide the borrower about the type of loan program they can choose. Depending on that, they can have guidelines for providing the best loan product that will be suitable for the customer’s profile.

The Advantages of the IDR Plans

In the States, student loans are a topic of debate where the government is planning to waive some of the loans of students who have maintained a payment record but are still suffering financial perils due to student debt.

One common advantage is that one can make the path toward IDR forgiveness, where one can find the common ways through which they can make the payments. It also provides the borrower an option to pay what they prefer and provides less financial burden on the initial terms.

Disadvantages of the IDR Plans

The role of recertification is required in each salary hike, and a person needs to consider the hike in the payment through which one needs to plan for every year. Here, a person doesn’t have any fixed plan for the following where they need to check how much they are paying each year, and it will continuously vary based on the changes that will happen in your annual pay package.

However, under this package, a person who has defaulted on loan repayment several times will be eliminated and will fall under the normal terms of repayment. It will take all the options and advantages of IDR from a person, and that can bring more financial stress to the life of a person.