Income-based Loan Repayment Plan: July 1, 2009

On July 1, 2009, a new federal program, called the Income-based Repayment Plan, goes into effect. If you’re a student in the process of repaying your federal student loans, you may qualify for the Income-based Repayment Plan, also referred to as the IBR, which caps your monthly loan payment at an amount calculated to be affordable based on your income and family size. Typically, the cap is set at 15% of your discretionary income.

An excellent IBR overview in the Boston Globe points out that one of the program’s goals is encouragement in a difficult employment climate: as a new grad, you may be willing to accept a lower-paying job if you don’t have to worry about a student loan payment bigger than your monthly take-home pay.

Since the Income-based Repayment Plan is a federal program, it bases your discretionary income on your adjusted gross income. The federal financial aid website has a preliminary calculator that can give you an idea of whether you qualify for the IBR program, but the financial institution you got your student loan from will ultimately calculate your lowered payment for you.

Only federal loans qualify for income-based repayment. Eligible federal loans include:

  • Stafford loans
  • Graduate PLUS loans
  • Most federal consolidation loans

Loans that are not eligible for IBR are:

  • Parent PLUS loans
  • Federal consolidation loans that include Parent PLUS loans
  • Private loans

Sallie Mae, a lender authorized to issue and manage federal student loans, also has information on the IBR program, and a downloadable worksheet that may help you determine your eligibility and monthly payment.

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