Bulletin ID
DLB - 94 - 6
| PublicationDate: 5/1/94 BulletinID: DLB - 94 - 6 Dear Colleague: Here is another in our series of Direct Loan updates- this one concerns the four repayment plans available to Direct Loan borrowers. We will have more information in the future about the income contingent repayment plan; as soon as we do, we will provide it to you. One of the benefits of the Direct Loan Program is the flexibility of repayment for borrowers. We think you will see that these plans offer borrowers a better chance to make good on their loans. Sincerely, Leo L. Kornfeld Deputy Assistant Secretary for Student Financial Assistance Programs Attachment Direct Loan Repayment Plans Direct Loan borrowers may choose to repay their loans under any of four repayment plans: the standard, the extended, the graduated, and the income contingent repayment plans. The specific terms of the repayment plans are currently being negotiated with the community and are subject to change. At this time, the U.S. Department of Education anticipates that the terms of the repayment plans will be as follows: The Standard Repayment Plan A borrower makes fixed monthly payments of at least $50 for up to 10 years. The Extended Repayment Plan A borrower makes fixed monthly payments of at least $50 for a period of time that varies depending on the amount of the loan. We expect the repayment period under the extended repayment plan to be as follows: Amount of Debt Years of Repayment less than $10,000 12 years $10,000-$19,999.99 15 years $20,000-$39,999.99 20 years $40,000-$59,999.99 25 years $60,000 or more 30 years The Graduated Repayment Plan Under this plan, the amount of a borrower's monthly payments increases over the life of the loan. This plan allows borrowers who anticipate that their incomes will increase to make small payments at the beginning of their repayment periods and to make larger payments later in their repayment periods. A borrower is required to repay his or her loans within the period of time required under the extended repayment plan described above. The Income Contingent Repayment Plan The details of this plan are being considered by negotiators and are likely to change. We will keep you informed as more information becomes available. Under the income contingent repayment plan, the amount of a borrower's payment varies in relation to the borrower's Adjusted Gross Income (AGI). The Department obtains a borrower's AGI directly from the Internal Revenue Service. We anticipate that a borrower will be assessed between 3 and 15 percent of his or her AGI, depending on the total amount of the borrower's Direct Loans. After 25 years of repayment, a borrower will not be required to make any additional payments. Federal Direct PLUS loans may not be repaid under the income contingent repayment plan. Alternative Repayment Plans The Department may provide an alternative repayment plan for borrowers who demonstrate that the terms and conditions of the above plans are not adequate to accommodate the borrower's exceptional circumstances. Alternative repayment plans will be assigned on a case-by-case basis to suit the needs of the borrower. |