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What is Income-Based Repayment (IBR)?

Income-Based Repayment (IBR) is a federal student loan repayment program that adjusts the amount you owe each month based on your income and family size. 

With an IBR plan, your payment amount will be capped at a certain percentage of your discretionary income or the amount you would pay under the 10-year Standard Repayment Plan. The percentage rate depends on when you took out the loan and if you had existing federal student loans. 

10 percent of discretionary income:

  • If you borrowed on or after July 1, 2014; and
  • You are a new borrower or had no outstanding balances on a federal student loan when you received the new loan.

15 percent of discretionary income:

  • If you borrowed your first loan before July 1, 2014. 

Will IBR lower my monthly payments? You get a lower payment with IBR if your federal student loan debt is high relative to your income and family size. While your loan servicer will perform the calculation to determine your eligibility, you can use the U.S. Department of Education's Repayment Estimator  to estimate whether you would likely benefit from an IBR plan.

The Repayment Estimator looks at your income, family size, and where you live to calculate your IBR monthly payment amount. If you have a subsidized loan and your monthly IBR payment is less than the interest that accrues each month, the government will pay the difference for the first three years and your overall balance won’t increase.

How do I apply for IBR? Contact your servicer to see if you qualify for IBR. Many borrowers with federal student loans can enroll in Income-Based Repayment (IBR) online . Your monthly payment adjusts every year based on your income and family size. You must submit documentation to your servicer each year to remain in the IBR program.

How long will I have to repay the loan? Any remaining balances of your loans are forgiven after you make payments for 20 or 25 years  if the loans are not repaid by then. The IRS considers the loan balances forgiven through IBR program a taxable event. If you expect that you cannot manage the tax implications given your income at that point in time, you can contact the IRS to discuss your options and learn more about payment plans.

Are there other repayment plans based on income? Yes, for some recent borrowers, the Pay as You Earn program (PAYE) or Revised Pay As You Earn (REPAYE) repayment plans may offer an even lower monthly payment.

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