“Direct Loan Alternative” is another type of repayment plan for Direct Loan borrowers only. To qualify for an alternative repayment plan, a borrower must show that the terms and conditions of the other available repayment plans are not adequate to accommodate the borrower’s exceptional circumstances. Borrowers will likely need to provide documentation of these exceptional circumstances. All Department servicers are required to offer alternative repayment plans. Your Direct Loan servicer may also place you in an alternative plan temporarily after a successful rehabilitation. This is usually temporary while the servicer is determining the payment amount under an income-driven repayment plan.
For now, there is no standard definition of “exceptional circumstances” to get an alternative repayment plan. The Department is considering whether to create some guidelines for all servicers to use.
These plans may be useful in many circumstances including for:
- Borrowers with very high medical debt or private student loan debt since the income-driven repayment plans do not take these expenses into account, and
- Borrower who do not qualify for income-driven repayment, such as parent PLUS borrowers.