Student loan borrowers have new options to help pay down what they owe.
The Repayment Assistance Plan, called RAP, is a “simple and affordable option to repay their federal student loans based on their income,” the Department of Education said in a news release.
It will allow borrowers to have income-based payments of between 1% and 10% of their income. If they have dependents, the payment amounts will be reduced by $50 per dependent. The payments are not based on what people still owe, the agency explained.
If borrowers have made 360 monthly, on-time payments, they can apply for an interest waiver and a matching principal payment to help pay down loans quicker, and lower the balance month-to-month.
The department pointed out that under “previous income-driven repayment plans, borrowers often spent years making payments that covered only the interest – or sometimes not even the full interest – leaving balances that were higher than when they started.”
The RAP program will waive the remaining unpaid monthly interest to help reduce “runaway interest.”
To apply for RAP, click here.
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There is also another repayment plan called the Tiered Standard plan, which is a fixed loan repayment plan based on both the amount borrowed and a fixed time frame of 10, 15, 20, or 25 years. It will give people with high balances more affordable monthly payments spread out over longer times.
Before the Tiered Standard, borrowers were automatically enrolled in a 10-year plan.
Both plans launched on July 1. For more information, click here.
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