managing student loans

Income-Contingent Repayment Option

The income-contingent repayment option is offered on most Direct loans, except for parent PLUS. Under this plan, your income and family size are assessed each year and help determine your monthly payment. How does this work?

1. Payments go up as your income increases and down as it decreases.
2. Payments go down as your income goes up and get larger if your income grows smaller.
3. If your income stays the same, payments still increase over time.

"A" is correct. If you have a limited income, your payments may be very small, even less than the amount of interest owed. Repayment also may extend up to 25 years. Loan balances that remain after that time don't have to be repaid -- or after 10 years for graduates who take public service jobs.