Income-Driven Student Loan Repayment (Part 1)

Eat sh*t, Sallie Mae.

(As seen on

“4 years of college and all we have are these clever grad caps to show for it.”

The cost of higher education is one of the primary reasons I’m usually angry. Personally, I’m relatively lucky. Scholarships covered most of my undergrad and I saved a shocking amount of money by staying in-state for law school. So I have a mortgage of student loan debt, but it’s probably for a place without a basement or garage.

No, my rage comes from the fact that $50,000+ student loan debts are far from rare in any case, and straight up typical for anyone with a graduate degree. Believe it or not, state universities were crazy cheap just a few decades ago. I worked for a judge who explained how his law degree cost him about $300 per semester in the 1960s. I paid over $10,000 per semester at the same school, a bargain in today’s American legal education. But when Boomers took the reins of state governments from their parents, most of them didn’t exactly pay it forward (or give a damn about members of their own generation who would go to college later). Since they weren’t going to college anymore, they cut higher education funding to buy more tax cuts. Less funding plus higher costs equals a buffet of fuckery which I hear we Millennials deserve because participation trophies.

Student loans are well on their way to becoming Americans’ largest debt, so I can promise this is an issue that will affect you whether you personally have any yourself. Unless we plan to import all of our future doctors, nurses, engineers, and lawyers, we need affordable higher education.

In the meantime, we have to work with the system we have. Fortunately this system improved somewhat in 2010 when an unusually lucid Congress realized it was silly to send all federal student loan funds through private lenders, which practically guaranteed them a profit but raised costs for students and taxpayers alike. Even better, now that the Department of Education directly owns student loans, it gained the ability to introduce repayment plans based on your ability to pay. This makes life slightly less miserable than when you had to explain to your lender that having $0 in your checking account means you can pay a maximum of $0 on your loan that month, that you are at least as disappointed with your financial situation as they are, and that unless the bill collector also called to offer you a job then things must remain at this unhappy impasse.

We now have the ability to make payments based on income, even if your current income is bullshit. But you are not automatically signed up, so you have to sign up if you actually want it. There’s a good chance if you’re reading this you’re qualified for income-driven repayment but haven’t acted on it yet.

But before I proceed, there are a few universal requirements to qualify for any of the “income-driven repayment” plans:

  1. You must have federal loans: Private loans aren’t eligible, even if you consolidate them into federal loans. Actually, don’t do that, since you’ll make the federal loans ineligible too. So before you go refinancing with one of those private lenders because they’ve got a snappy website…don’t.
  2. They must be the right federal loans: Direct loans qualify for every income-driven plan. FFEL loans (Stafford, PLUS, consolidation, and SLS) qualify for one. Other federal loans such as Perkins, HEAL, and specific health education loans don’t qualify. There is no good reason for why they don’t. They just don’t. That’s Congress for you.
  3. Your loans must not be in default: Defaulting on federal student loans is a nightmare you should avoid at all costs. One of my Perkins loans went into default while I was studying abroad despite the fact that my grad school knew I was studying abroad. Even though I got the mistake sorted out eventually, I can promise you default is awful even when someone else’s screw-up gets you there.

The point of this series is to help you change that and pick the best plan for you. I’ll be adding information specific to each plan over the week. So strap in good buddy and join me on a journey to somewhat less financial rage.