Income Based Repayment (IBR)

income-based-payment-ccassists borrowers whose student loan debt is high compared to income. The plan is designed to reduce monthly payments in order to make them more affordable. To qualify for IBR, a borrower must demonstrate partial financial hardship.

A partial financial hardship occurs when a borrower’s monthly amount required for payment on the borrower’s eligible student loans under a 10-year Standard Repayment Plan is higher than the monthly amount required under IBR. The payment amount for an IBR Plan may increase or decrease each year based on the borrower’s income and family size. Additionally, once a borrower has qualified for IBR, payments may continue even if the borrower later no longer demonstrates partial financial hardship.

The IBR Plan structures loan payments based on the borrower’s income and family size. Each year, the payment under IBR will be adjusted based on changes to annual income and family size. A monthly payment will be 15 percent of the borrower’s discretionary income and will never be more than the amount required under a 10-year Standard Repayment Plan. IBR payments may also be less than other repayment plan payments.

EXAMPLE: Borrower with family size = 1, Adjusted gross income = $50,000

Discretionary income = adjusted gross income minus poverty guideline*
$50,000 – $16,755 = $33,245

$33,245 x 15% = $4,986.75

$4,986.75 ÷ 12 months = $416 (rounded) each month for IBR payment

*based on 2012 Federal Poverty Income Guidelines as of January 26, 2012.

In addition to a more manageable monthly payment, the IBR plan also helps limit the interest paid on student loans. If the monthly payment amount under IBR does not cover the interest that accrues on the loans each month, the government will pay the unpaid accrued interest on Direct Subsidized, Subsidized Federal Stafford Loans, and on subsidized portions of Direct or FFEL Consolidation Loans for up to three consecutive years from the date the borrower began repayment under IBR. Additionally, while the borrower demonstrates partial financial hardship, interest accrued that is not covered by loan payments will not be capitalized, even if it accrues during deferment or forbearance.

IBR payments are structured for a term of 25 years. If a borrower on the IBR plan has made qualifying payments for 25 years, and a balance remains on the loans, the remaining balance will be forgiven.

Eligible Federal Loans

Direct Subsidized Stafford Loans (Direct Loan Program)
Direct Unsubsidized Stafford Loans (Direct Loan Program)
Direct PLUS Loans made to graduate or professional students
Direct Consolidation Loans without underlying PLUS loans made to parents

Loans that are NOT Eligible

FFEL Program Loans
PLUS loans made to parents, unless consolidated into a Direct Consolidation Loan on or after
July 1, 2006
Private education loans

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Disclaimer: This site does not negotiate, adjust or settle debts. All federal student borrowers are able and encouraged to apply for any federal repayment or forgiveness programs through the US Department of Education for free without paying fees to any entity. Nothing on this site constitutes official qualification or guarantee of result. Student Debt Doctor offers fee-based services to assist with application preparation for federal student loan and other programs.
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