Student loan default is becoming increasingly common across the USA. Unfortunately, this can have serious repercussions. Not only does it earn you a black mark on your credit history but it also pushes you even further in debt. But what do you know if you are just not earning enough to pay back your student loans? That’s where income-based repayment plans come in.
Income-Based Repayment Plans
The answer lies in opting for income based repayment plans. With this repayment plan, no matter how small your earnings, your loan payments will always be affordable. This is because the amount you have to pay back every month is directly linked to the amount you earn. In most cases, the amount you have to pay back every month is limited to about 15% of your total earnings.
This means, if you earn a higher salary, you pay back more and if you earn a lower salary, you pay back less.
While an income based repayment plan could extend your loan term by a few years and increase the total amount of the loan, it also reduces your chances of defaulting on your loan, which is a far worse scenario.
Go Beyond the Standard
It is important to understand that you are not forced to stick with your standard loan repayment term. If you think you are at risk of defaulting, speak to your lender and ask to switch over to an income based repayment plan.
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