There are various differences between each of the repayment plans, but one of the biggest differences is how interest is treated.
- IBR, PAYE, and REPAYE offer different levels of interest subsidies which means they all accrue interest differently.
- It is important to be aware of how interest is calculated because in many cases, the payments you make when on an IDR plan will not cover the monthly interest accrual.
- Making errors in filing paperwork, not re-certifying your income to stay on your IDR plan, consolidating your loans, and refinancing could lead to your interest capitalizing which leads to a growing principal balance.
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