In Debt Management, Education Planning, Student Loans

Large student loan debt can be managed with the help of a repayment strategy that best fits your needs.

According to Pew Research, 34 percent of American college graduates between the ages of 18 to 29 have student loan debt. Another 22 percent of college grads between the ages of 30 to 44 carry student loans, with the highest loan balance averaging $45,000 for postgraduate level degrees.

Student loan debt can be heavy and burdensome, and it’s on the rise as the cost of education continues to soar at a rate eight times faster than wages. Why the cost of a 4-year college degree has nearly doubled since 1989 has many contributing factors. We may not be able to control the price of higher education, but there are options on how to tackle student loan debt in a way that doesn’t leave you unable to fund other important financial goals.

After all, people earn higher education degrees with the expectation that it will lead to more income-earning potential over a lifetime. Therefore, it can feel incredibly counter intuitive to then be delayed in securing your financial future if you’re weighed down by a high student loan balance.   

Here is what you need to know about an income-driven repayment plan and how it can help you manage your student loan debt.

An Effective Way to Manage Student Loans

An income-driven repayment plan can be an effective way to manage student loans, because it is a way to adjust your monthly student loan payments in proportion to your discretionary income.

If you have federal student loans, such as those listed below, you may be eligible for one of the five available income-driven repayment plans.

  • Direct Subsidized loans for undergraduates who demonstrate a financial need.
  • Direct Unsubsidized loans for undergraduate, graduate, and professional students, where eligibility is not based on financial need.
  • Direct PLUS loans for graduate or professional students and parents of dependent undergraduate students to help pay for education expenses not covered by other financial aid. Eligibility is not based on financial need, but a credit check is required. Borrowers who have an adverse credit history must meet additional requirements to qualify.
  • Direct Consolidation loans that combine all of your eligible federal student loans into a single loan with a single loan servicer.

The 5 Income-Driven Repayment Plans

There are five main Income-Driven Repayment plans that you can look into if you have federal student loans. Each of the five plans have eligibility requirements and limit monthly payments to 10 percent, 15 percent, or 20 percent  of your discretionary income, depending on the plan(s) your eligible for.  

    1. Income-Based Repayment (IBR Old): If your first federal loans were issued before July 1, 2014 and limits payments to 15 percent of discretionary income. Direct Loans and FFEL Loans are eligible.
    2. Income-Based Repayment (IBR New): If your first federal loans were issued on or after July 1, 2014 and limits payments to 10 percent of your discretionary income. Direct Loans, excluding Parent Plus loans, are eligible.
    3. Pay As You Earn (PAYE): If you had no federal student loan balance on or before October 1, 2007 and new federal loans were issued after October 1, 2011 and limits payments to 10 percent of your discretionary income. Direct Loans, excluding Parent Plus loans, are eligible.
    4. Revised Pay As You Earn (REPAYE): Direct Loans, excluding Parent Plus loans, are eligible and limits payments to 10 percent of your discretionary income. 
    5. Income-Contingent Repayment (ICR): Direct Loans, as well as Direct Consolidated Loans with Parent PLUS Loans are eligible and limits payments to 20 percent of your discretionary income. 


As someone with a undergraduate, graduate, or postgraduate degree, you can find yourself with a high student loan balance that undermines your ability to pay back the loans, support your daily financial needs, and fund future financial goals. You didn’t become a highly trained professional in your field of study to then struggle financially.

As a CERTIFIED FINANCIAL PLANNER™ professional and a CERTIFIED STUDENT LOAN PROFESSIONAL™, I work with high-achieving professionals to devise a strategy for paying off student loan debt and funding your current and future financial goals. Let me be the first one to assure you that large student loan debt doesn’t have to prevent you from living your best life right now. 

As always, I invite you to reach out to me – in real life – with any comments, feedback, or questions!  [email protected] Are you ready to take the first step towards securing your financial future? If so, schedule your free 45-minute no-obligation consultation with me today. Schedule Your Consultation with Frank.

Disclaimer: The information contained in this article is for informational purposes.  None of the information provided in this article is intended as investment, tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. Please consult with your accountant, finance professional, and/or legal counsel regarding your specific circumstances. Reproduction of this material is prohibited without written permission from Frank Shields, and all rights are reserved. Read the full Disclaimer.

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