Income Based Repayment

Income Based Repayment is an option for both Direct Loan borrowers and borrowers under the Federal Family Education Loan Program (FFEL).

If you took out your loan after July 1st 2014 then you could obtain loan forgiveness under the plan after 20 years.  For borrowers of federal loans before that point, forgiveness can be achieved after 20 years.

The plan is based on your income and the poverty level for your state.  Sign up for the plan and make sure that each year you re-submit your income and/or re-apply to stay on the Income Based Repayment Plan.

Payments over 20 (or 25) years will need to fit into one of six categories:

  1. Reduced payments (or a payment of zero) under a partial financial hardship
  2. Reduced payments when you no longer were deemed to have a partial financial hardship
  3. Payments which weren’t less than the Standard Repayment Plan
  4. Payments based on the Standard Repayment plan in effect when you first chose IBR
  5. Payments under the Income Contingent repayment plan (as long as you qualified for that plan)
  6. Period of economic hardship deferment (for up to three years)

If you’re applying under the FFEL loan program, use the special IBR form for FFEL loans.

Don’t consolidate a Parent PLUS loan with other loans unless you want to disqualify the loan for IBR.

When your student loan payment is more than 10% (15% for those before July 1st 2014) of the spread between your Adjusted Gross Income (from your tax return) and 150% of the federal poverty level for your state (and family size) that’s when you are determined to have a partial financial hardship which is one of the criteria for IBR.

When calculating family size, include children for which you provide more than 50% of their support, regardless of custody and/or tax deductibility.

If you filed jointly with your spouse, then you would have to include her income (your combined married filing jointly Adjusted Gross Income) as part of the calculation.

The amount of the student loan payment is based on the Standard Repayment Amount over 10 years for the amount you borrowed when you first took out the loan or when you first selected IBR, whichever is greater.

Contact your loan servicer or a professional for more information.