An income-based repayment or simply income-drive repayment plan is a student loan program in the USA that governs the amount of money one has to pay monthly depending on one’s monthly income and family size. It is usually designed for those who are employed but need to defer their student loans until they get their first paycheck. However, there are also some students who are working during their studies and are eligible to take up this plan.
There are many benefits that a student can avail by opting for this type of repayment scheme. Firstly, it provides you with flexibility. Unlike other types of repayment plans such as income-based repayment, there is no limit on how much you can borrow. As such, you do not have to worry about the repayment of large amounts.
In addition, it gives you more options to choose the repayment method that suits your individual needs. You can either opt for single loan or a multiple loan. If you opt for a single loan, you only have to pay a single installment each month. If you opt for a multiple loan, you pay various amounts according to the requirements of your lenders.
With the help of various income-drive repayment calculators, you can estimate how much you will need to make each month to cover your costs. It also helps you in calculating what your monthly income should be to meet your living expenses. If you know how much you make each month, then it becomes easy to calculate how much you have to repay each month.
Another benefit that student loans offers is to help one to settle his debts faster. There are many sources available online where one can get information about these schemes. A student should therefore make use of them in order to gain knowledge and then choose an appropriate plan for himself.
In order to start availing this kind of repayment scheme, a student should first find out whether he is eligible to take up such a plan. Usually, the loan provider looks at the information that one provides in order to determine whether the applicant is eligible for a single loan or a multiple loan. In order to find out whether you are eligible for income driven repayment, one must fill out an application form that contains the necessary personal information.
The reason why one is eligible for this kind of repayment scheme can also be checked by checking if the student’s parents are eligible. Most student loans providers will consider whether they are financially responsible parents before approving them for this plan. In this case, the student should be under the care of his parents and not use any money that he receives from the government as repayment aid. Also, there are certain rules and regulations governing the repayment plan that a student has to follow.
Debt consolidation is another method that a student can adopt to consolidate his debts. This means that one takes out one loan that is secured by his house or property against his existing unsecured debt. This ensures that he will not have to make another payment each month. One can thus easily clear off his debt in a single monthly payment.
However, since the former is considered to be more risky than the latter, one must first calculate whether you are able to pay off a single or multiple loan. In order to do this, one has to calculate how much the total amount of debt will be before one makes a final decision about whether to go for single or multiple loans. For instance, with the single loan, one will have to pay off all his credit cards and one is free from the burden of paying interest on these cards every month.
A student can also use an income-driven repayment calculator to decide if he is better off opting for a consolidation plan or taking out a second mortgage. Once he has calculated how much the monthly salary he can afford to pay off each month, he can then choose to opt for the latter option. This option allows him to get rid of his debt quickly without paying interest for the next several years.
One other thing that a student who wants to avail of this kind of repayment scheme must consider is that it is not suitable for those students who have bad credit history. For this reason, the student needs to approach a reputable loan provider and request for advice. Since he is looking for an appropriate plan, he should ensure that the loan provider offers no-claims bonus.