Unforeseen loss of income may significantly affect one’s ability to make federal student loan payments. Fortunately, the US Department of Education offers ways to adjust repayment responsibilities under financial conditions at the time.
Income-Driven repayment plans
Income-Driven Repayment (IDR) plans are designed to adjust monthly student loan payments based on a borrower’s income level and family size. The plans are listed below:
In all the above plans, the monthly instalment may be as low as $0 in the event of major loss of income by the borrower. For instance, if you earn no income, your payment will be $0 under these plans despite your decreased income being a result of a layoff, strike, furlough, or other temporary loss of income. This also holds for employees with intermittent employment, who are also eligible to recertify their IDR payment when income is lost.
Steps to modify your payments
To change your payment amount under an IDR plan:
- Become enrolled in an IDR Plan: If not already enrolled, think about signing up for an IDR plan, particularly during times of income decrease.
- Recertify your income: You may recertify your income by phone to your servicer or by submitting an online application by signing on a paper stating your income. A written document is acceptable if that is what you have available. The online application only requires most people 10 minutes or less.
Ensure that you can recertify your income at any moment and that you do not need to recertify for 12 months.
Recent changes affecting payment plans
Through the end of March 2025, federal student loan repayment plans have had significant changes, as shown below
- Suspension of certain IDR plans: The Department of Education has shut down online applications for several IDR plans, including the Saving on a Valuable Education (SAVE) plan, following a ruling by the 8th Circuit Court of Appeals. The action has created uncertainty among borrowers regarding their payment options.
The majority of borrowers, such as Natasha Stephens, are concerned with the cancellation of the SAVE plan, a scheme initiated to provide reduced monthly payments and quicker loan forgiveness. Cancellation of the program has left individuals in a dilemma about their financial future.
Alternative solutions in the event of the financial crisis
If payment changes under an IDR plan are not feasible, the following alternatives may be considered:
- Deferment or forbearance: These are postponement of reduction or suspension of payment. However, interest can still accrue over this period, which may increase the cost of repayment overall.
Working with private student loans
Private student loans rarely have the flexible repayment schedules that government loans provide. However, a handful of lenders do provide hardship programs or suspended reduction of payments. Do contact your loan servicer in person to ask about what assistance is available to them. And even refinancing from a lender that provides more beneficial terms can be done.
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