“Income-Based Repayment Plan” (IBR) is an income-driven federal student loan repayment plan which sets the borrower’s monthly student loan payment at an affordable amount based on the borrower’s income and family size.
What Federal Student Loans are Eligible for IBR?
- Direct Subsidized Loans
- Direct Unsubsidized Loans
- Direct PLUS Loans made to graduate or professional students
- Direct Consolidation Loans that did not repay any PLUS loans made to parents
- Subsidized Federal Stafford Loans (from the FFEL Program) – Eligible if consolidated*
- Unsubsidized Federal Stafford Loans (from the FFEL Program)
- FFEL PLUS Loans made to graduate or professional students
- FFEL Consolidation Loans that did not repay any PLUS loans made to parents- Eligible if consolidated*
- Federal Perkins Loans – Eligible if consolidated*[i]
Only federal student loans can be repaid under the IBR. Private student loans are not eligible.
IBR is not available for Parent PLUS loans or Consolidation loans that include Parent PLUS loans.
How are Monthly Payments Payment Amounts Calculated?
Under IBR, the monthly payment is based upon the lesser of the following:
- 15 percent of the borrower’s discretionary income or
- what the borrower would pay on a repayment plan with a fixed payment over the course of 12 years, adjusted according to the borrower’s income.
How Long is the IBR Plan?
Under IBR, the repayment period is 20 years if the borrower is a new borrower on or after July 1, 2014 or 25 years if the borrower is not a new borrower on or after July 1, 2014.
IBR Loan Forgiveness
If the borrower is making payments under IBR and also working toward loan forgiveness under the Public Service Loan Forgiveness (PSLF) Program, the borrower may qualify for forgiveness of any remaining loan balance after only 10-years of qualifying payments, instead the 20- or 25-year payment plan.
Will Payment Remain the Same Amount for the Life of the Income-Driven Repayment Plan?
No, under each IBR the borrower is required “recertify” his or her income and family size each year. This means that the borrower must provide the loan servicer with updated income and family size information so that the loan servicer can recalculate the IBR eligibility and payment amount. The borrower must do this even if there has been no change in income or family size.
Although recertification is only required once each year, if the borrower’s income or family size changes significantly before the annual certification date (for example, due to loss of employment), the borrower can submit updated information and ask the loan servicer to recalculate the payment amount at any time. The borrower is not required to report changes in his or her financial circumstances before the annual recertification date. The borrower can wait until the recertification date to report an increase income.
If the borrower does not recertify by the annual deadline, the borrower will remain on IBR plan, but the monthly payment will no longer be based on income. Instead, the required monthly payment amount will be the amount the borrower would pay under a Standard Repayment Plan with a 10-year repayment period, based on the loan amount the borrower owed when he or she initially entered the income-driven repayment plan.
If the borrower does not recertify his or her family size each year, the borrower will remain on the same repayment plan, but the loan servicer will assume that the borrower has a family size of one.
Eligibility for IBR
Any borrower with eligible federal student loans can apply for IBR. To qualify, the payment the borrower would be required to make under the IBR plan (based on income and family size) must be less than what the borrower would pay under the Standard Repayment Plan with a 10-year repayment period.
If the amount is more than the 10-year Standard Repayment Plan, there would be no benefit from having the monthly payment amount based on income and so the borrower would not qualify.
Generally, the borrower will meet this requirement if his
or her federal student loan debt is higher than his or her annual discretionary
income or represents a significant portion of that annual income.
[i] *“eligible if consolidated,” means that if the borrower consolidates that loan type into a Direct Consolidation Loan, the borrower can then repay the consolidation loan under the income-driven plan. However, if the borrower consolidates a FFEL Program Loan or Federal Perkins Loan into a Direct Consolidation Loan, the borrower may then be able to repay the Direct Consolidation Loan under the REPAYE, PAYE, and ICR Plan (depending on the type of loan consolidated).