Salary Based Repayment Disadvantages

When considering an income based repayment plan you will find that the benefits will out house mortgageweigh the disadvantages. However when you discover what the disadvantage is you might decide that you will keep your loan with bad credit the way it is and not worry about changing it. Even if it does mean that you will keep paying a larger payment every month for the life of the loan.

What Is Income Based Repayment

An income based repayment plan is available if you have a federal loan. Loans that will qualify are the Stafford loan, the Grad PLUS, or any consolidation loan that is included in the FFEL or Direct loan program. What this plan does is that it considers how much your monthly payment is compared to the amount of income you have and the size of your family.

If you are having trouble making ends meet every month this plan might be the best option for you. This can lower your monthly payment and you will have extra money to put towards your other living expenses every month.


There are a number of benefits when it comes to this type of program. Of course the obvious benefit is that of a lower monthly payment than the standard plan you currently have. Other benefits will include the fact that any interest which has not been paid from the Subsidized Stafford Loan interest will be reimbursed by the government for up to three years if the payments on your current income based repayment loan does not cover the monthly interest. Another advantage is that after twenty-five years of repayment your balance will be cancelled. You also have the option of having your balance cancelled after working in a public service position for ten years.


You will find that the advantages will definitely outweigh the disadvantages. The largest of these disadvantages is the fact that because your repayment plan will be a longer period of time you will be paying more interest than that of your original plan. When you go from a plan that is a repayment period of ten years to a plan of twenty-five years the amount of interest will increase dramatically.

Another disadvantage is that you will be required to submit a summary that shows your family size. They will want to know if your family has increased or unfortunately decreased in size. This can affect the amount of no credit check loan you will be eligible for. You will also have to include your amount of income. This should also include any other amount of income from other family members that are living under your roof. This can also affect the amount of the loan you are eligible for. If you fail to do this very important step on an annual basis you will lose the option of this plan and your loan will revert back to the original plan you had and your payments will be higher once again.

Making the decision of selecting an income based repayment plan is strictly up to you and your financial situation. If you have any questions about the disadvantages compared to the benefits you can consult a loan advisor. They should be able to answer all of your questions.


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