If your payments are not large enough to cover the interest that has accumulated on your loans, the unpaid amount will be capitalized once each year. However, capitalization will not exceed 10 percent of the original amount you owed when you entered repayment. Interest will continue to accumulate but will no longer be capitalized. The maximum repayment period is 25 years. If you haven’t fully repaid your loans after 25 years under this plan, the unpaid portion will be discharged. You may, however, have to pay taxes on the amount that is discharged.
In all income-driven repayment plans, the amount of your monthly payment will be calculated on the basis of the money you make, not the money you owe—specifically, your payment will be based on your discretionary income. Generally speaking, discretionary income is the amount of money you have to spend each month after you pay for the essentials, like rent, utilities, and food. While you can’t really decide not to pay your rent in a given month, you can decide not to go shopping for new clothes—the clothes portion is discretionary. Rather than try to figure out what each person’s expenses are essential compared with their discretionary income, the federal government has a way of calculating your discretionary income: They start with your adjusted gross income (i.e., the income, after all legitimate deductions, on which your federal income tax is calculated, also referred to simply as AGI). Then they subtract 150% of the federal poverty line for your family size. The difference between your AGI and 150% of the federal poverty line for your family size is your discretionary income—and that’s the number that will form the basis for calculating your monthly loan payment.
Thank you all so very very much!!!!
It is such a relief to get out from underneath this loan. It has weighted on my heart for a while. Other agencies that I have tried I could not do what you have done and I am greatly appreciative.
So, thank you again. God bless you. Have a great week!
Thank you, Thank you, Thank you both for ALL your help!