Sometimes it can happen where a borrower does not meet the eligibility requirements for any of the Income Driven Repayment Plans or Balance based Repayment Plans but for whom standard repayment is not possible. These borrowers can request to be placed on an Alternative Repayment Plan.
To be considered for an Alternative Repayment Plan, the borrower must show evidence of exceptional circumstance. Currently, alternative repayment options may be customized to fit the borrower’s needs within the following restrictions:
- The maximum term is 30 years (including time already spent in repayment, other than periods of deferment or forbearance),
- Payments cannot vary by more than three times the smallest payment, and
- The minimum payment is $5.
Payments may not be below monthly-accrued interest (negative amortization).
The borrower can specify any fixed payment amount desired as long as the payment is at least $5, and the loan is paid off in 30 years.
The borrower continues to pay the fixed amount, unless the payment is adjusted to avoid negative amortization or to ensure that the loan will be completely paid off within 30 years. This adjustment could occur after the annual interest rate change.