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Student Loan Income Based Repayment Plan

If your student loan debt is high relative to your income, you may qualify for the Income-Based Repayment Plan (IBR).

As a credit consultants, you will get calls regarding several issues and a student loan is a major issues facing consumer. We want to equip you with the necessary information to point clients to the right source for solving their problems. Clients see you as the expert in this field.

Most major types of federal student loans—except for PLUS loans for parents and Consolidation Loans that repaid PLUS loans for parents—are eligible for IBR.

Income-Based Repayment (IBR) is designed to reduce monthly payments to assist with making your student loan debt manageable. If you need to make lower monthly payments, this plan may be for you.

To qualify for IBR, you must have a partial financial hardship. You have a partial financial hardship if the monthly amount you would be required to pay on your IBR-eligible federal student loans under a 10-year Standard Repayment Plan is higher than the monthly amount you would be required to repay under IBR. Your payment amount may increase or decrease each year based on your income and family size. Once you’ve initially qualified for IBR, you may continue to make payments under the plan even if you later no longer have a partial financial hardship. Find out whether you’re eligible.


Eligible Federal Loans

The following loans from the William D. Ford Federal Direct Loan (Direct Loan) Program and the Federal Family Education Loan (FFEL) Program are eligible for IBR:

  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • Direct PLUS Loans made to graduate or professional students
  • Direct Consolidation Loans without underlying PLUS loans made to parents
  • Subsidized Federal Stafford Loans
  • Unsubsidized Federal Stafford Loans
  • FFEL PLUS Loans made to graduate or professional students
  • FFEL Consolidation Loans without underlying PLUS loans made to parents

 


Loans That Are Not Eligible

The following loans are not eligibile for repayment under IBR:

  • PLUS loans made to parents
  • Consolidation Loans that include underlying PLUS loans made to parents
  • Private education loans

 


Monthly Payments

Under this plan, your monthly payments are

  • based on your income and family size;
  • adjusted each year, based on changes to your annual income and family size;
  • usually lower than they are under other plans;
  • never more than the 10-year standard repayment amount; and
  • made over a period of 25 years.

 


Advantages of IBR

  • Pay based on what you earn—Under IBR, your monthly payment amount will be 15 percent of your discretionary income, will never be more than the amount you would be required to pay under the 10-year Standard Repayment Plan, and may be less than under other repayment plans.
  • Interest payment benefit—If your monthly IBR payment amount doesn’t cover the interest that accrues (accumulates) on your loans each month, the government will pay your unpaid accrued interest on your Direct Subsidized Loans or Subsidized Federal Stafford Loans (and on the subsidized portion of your Direct or FFEL Consolidation Loans) for up to three consecutive years from the date you began repaying your loan under IBR.
  • Limitation on the capitalization of interest—While you have a partial financial hardship, interest that accrues but is not covered by your loan payments will not be capitalized, even if interest accrues during a deferment or forbearance.
  • 25-year forgiveness—If you repay under IBR and meet certain other requirements, any remaining balance will be forgiven after 25 years of qualifying repayment.
  • 10-year public service loan forgiveness—If, while you are employed full-time for a public service organization, you make 120 on-time, full monthly payments under IBR (or certain other repayment plans) you may be eligible to receive forgiveness of the remaining balance of your Direct Loans through the Public Service Loan Forgiveness Program.

 


Disadvantages of IBR

  • You may pay more interest—A reduced monthly payment in IBR generally means you’ll be repaying your loan for a longer period of time, so you may pay more total interest over the life of the loan than you would under other repayment plans.
  • You must submit annual documentation—To set your payment amount each year, your loan servicer, the organization that handles billing and other services for your loan, needs updated information about your income and family size. You must provide the documentation or your monthly payment amount will be changed to the amount you would be required to pay under the 10-year Standard Repayment Plan, based on the amount you owed when you began repaying under IBR, and will no longer be based on your income. This amount will be higher than your prior IBR payment that was based on your income. If you do not provide the required income documentation, unpaid interest will also capitalize.
  • You may have to pay taxes on any loan amount that is forgiven after 25 years.

Calculate your estimated loan payments under this plan!


Tools and Resources for IBR

Want more detailed information about IBR?

  1. Download the IBR fact sheet.
  2. Browse the IBR Questions and Answers (Q&As). Q&As are grouped into six categories:
  • General Information
  • Eligible Loans
  • Determination of IBR Monthly Payment Amount
  • Married Borrowers
  • Application Process
  • Other Information

 


Want to Apply for IBR?

Contact your loan servicer before you apply for IBR.  Your loan servicer will answer your questions about the IBR plan and help you to decide whether IBR is the right plan for your situation.

If you are ready to apply for IBR, go to StudentLoans.gov, sign in, and complete the electronic Income-Based (IBR)/Pay As You Earn/Income-Contingent (ICR) Repayment Plan Request.


Need Help Repaying Your Student Loans?

If IBR is not right for you, contact your loan servicer to discuss other repayment options. You may be able to change your repayment plan to one that will allow you to have a longer repayment period. Also ask your loan servicer about your options for a deferment or forbearance or loan consolidation.

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Experian FICO score BACK available at myFICO again

A dark day for consumer was February 14th, 2009; yes it was Valentine’s Day but consumer did not get any love from some CRA. It was the last they actually had access to all three of their FICO credit scores on myFICO.

As of now Experian and FICO just announced that they would once again team up and make FICO scores based on Experian data available to consumers.

NOTE: FICO scores based on Experian data continued to be available to lenders for a while February 2009, even though they were not available to consumers.

Why Is This Important?

Any time consumer’s loses or gain access to credit scores based on what lenders is new worthy.

Even though myFICO charges $19.95 for credit scores based on just Equifax and TransUnion at least consumers will have the option to get three of their FICO scores again.

Mortgage lenders commonly use all three of your FICO scores as a common component to their underwriting practices. Credit card issuers and auto lenders that use FICO scores generally use only one of your three.

Experian also installed the newest version of the VantageScore credit score, referred to as “VantageScore 3.0.” A prior version of the VantageScore credit score is already available to consumers, at no cost.

The estimated date of the re-release of the Experian/FICO score via myFICO has not been publicly announced by either party. However, all of the pipes are still in place and just needs to be turned back on; meaning that it should not take long to implement.

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Understanding A Residential mortgage credit report (RMCR)

Residential mortgage credit report (RMCR) is a supplemental report that provides details on items that have been flagged in a merge report as a result of combining reports from Equifax, Trans Union and Experian.

Your lender may request a residential mortgage credit report when you are applying for a mortgage and the RMCR will contain combined information from at least two of the three national credit bureaus. It will check whether your residency, employment, credit scores, etc are compliant with or exceeding Fannie Mae, Freddie Mac, FHA, and VA guidelines.

The residential mortgage credit report (RMCR) is used by mortgage lending customers when different trade line verifications are needed, and includes features as verification and update of collection accounts, re-verification of disputed information, verification of liabilities, and other relevant items.

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Scoring Thin Credit Reports

All industries have unique terminologies including the credit industry.  A common term used to as a description of a credit report is “thin,” which describe the amount of information housed by the report. What is a thin credit report, and do you have one?

A thin credit report is lacking in credit history and contains very few accounts.  This would represent someone new to credit who does not have much credit in their name.  Some examples are:  someone new to the work force, students, people new to the U.S, widows, and divorcees.

Having a thin report with few accounts makes it challenging for lenders to access risk.   Credit scores give unique treatment to thin reports and evaluate them as their own group (against their peers), instead of comparing them to thick reports or those with many accounts, years of credit history and mixture of different types of accounts.

Thin credit reports can receive a credit score, but there are certain requirements that have to be met and can differ depending upon the score.

FICO scoring criteria

In order for a credit report to receive a FICO score, the credit report must meet the following criteria:

1.  The credit report must have at least one account that has been updated in the past six months. The date used is the date the information was updated on the credit report, which is the “date reported” field.

2.  The credit report must have at least one account that has been opened for a minimum of six months.  The date to determine this is the “date opened” field on the credit report. The account has to be at least six months old.

3.  There is no deceased indicator on the credit report.  This can occur if the individual listed on the credit report is deceased, or if the individual shares an account with someone who is deceased.

One account can meet the first two requirements.  An account that is 1 year old and has been updated in the past 6 months will qualify the consumer’s file for a FICO score.

VantageScore scoring criteria

A VantageScore credit score can be calculated on a consumer’s credit report as long as there’s an account (more formally referred to as a “trade line”) that has been updated in the past 24 months, based off the date reported. If, however, there is no account information available in that time frame, the newest VantageScore credit score may be able to generate a score based on older data or solely on non-account data such as collection information, public record information and inquiries.