Help with student loan please?

10pts. PLEASE HELP! Income Contingent Repayment Plan (student loan)?

• I had my Sallie Mae student loans consolidated w/ Direct Loan. They paid about $10,000 and now I owe Direct Loan $13,000. I initially opted for a standard repayment plan which is $77/month. I called yesterday and asked about the Income Contingent Repayment Plan. Under that plan I will pay $0/month or pay what I can, after 25 years the debt will be written off and I will claim it on my taxes as earned income. I have 2 questions. 1. Assuming, I will not become rich or make over $40,000 a year, is this plan a good idea? (I'm not going back to school and can't do much w/ my degree, anyway- I make more now that what I can w/ an associates degree in my area) 2. Will this help build my credit, since I will never make a late payment? You can read this if it helps. Thanks so much. Income Contingent Repayment This plan gives you the flexibility to meet your Direct Loan obligations without causing undue financial hardship. Each year, your monthly payments will be calculated on the basis of your adjusted gross income (AGI, plus your spouse's income if you're married), family size, and the total amount of your Direct Loans. Under the ICR plan you will pay each month the lesser of: the amount you would pay if you repaid your loan in 12 years multiplied by an income percentage factor that varies with your annual income, or 20% of your monthly discretionary income*. If your payments are not large enough to cover the interest that has accumulated on your loans, the unpaid amount will be capitalized once each year. However, capitalization will not exceed 10 percent of the original amount you owed when you entered repayment. Interest will continue to accumulate but will no longer be capitalized. The maximum repayment period is 25 years. If you haven't fully repaid your loans after 25 years (time spent in deferment or forbearance does not count) under this plan, the unpaid portion will be discharged. You may, however, have to pay taxes on the amount that is discharged.

• Answer:

  If you are making $20,000 a year now, you will almost assuredly be making $40,000 in the next quarter-century. But, if you are having trouble making standard payments, this sounds like a viable option.