One drawback to income-based repayment plans is that you have to reapply every year to qualify for lower payments. To make matters worse, the IRS data-retrieval tool that helps borrowers apply for these repayment plans has been shut down since early March over concerns about cybersecurity.
"It was already a difficult process to apply for income-driven repayment plans with the IRS data-retrieval tool and now that process is more difficult," Kantrowitz said. The Department of Education said that the tool will be available for borrowers to use for income-based repayment plans later this month.
Check out the Department of Education's repayment estimator to compare what your monthly payments would be under income-driven repayment plans.
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Your loan servicer may not tell you about income-based repayment plans.
More than 90 percent of the borrowers who rehabilitated a defaulted loan with their servicer were not enrolled in income-based repayment plans, according to a new report from the Consumer Financial Protection Bureau. The CFPB found that those troubled borrowers who did not enroll in a repayment plan were five times more likely to default for a second time.
The bureau has called for loan servicers to make the transition from default to an income-based repayment plan easier for borrowers. Last year, the Department of Education changed the rules to penalize loan servicers when accounts they manage go delinquent and default, but those metrics exclude borrowers who defaulted before the new rules.
"For far too many borrowers, the dream of a fresh start turns into a nightmare of default and deeper debt," said CFPB Student Loan Ombudsman Seth Frotman.
The Trump administration is considering replacing the current five income-based repayment plans with a single plan, according to budget documents obtained by The Washington Post.