The Lowdown on Income Based Repayment Plans
An Income Based Repayment (IBR) is one repayment plan option for student loans, under the William D. Ford Federal Direct Loan (Direct Loan) Program, or the Federal Family Education Loan (FFEL) Program.
Any Stafford, Grad PLUS, or Consolidation loan made under the Direct Loan or FFEL program is eligible for repayment under the Income Based Repayment Plan – except loans that are currently in default, parent PLUS Loans, or consolidation loans that paid for a parent PLUS loan. Income Based Repayment Plans can pay for new or old loans from your undergraduate, graduate, or professional education or job training.
If you qualify for a IBR Plan, your required monthly payment is capped at an amount that is intended to be affordable based on your income and family size. It will be less than what you would have to pay under a 10-year Standard Repayment Plan.
President Obama’s new student loan proposal states that the cap on federal student loan payments will be lowered from 15 to 10 percent of income, and will forgive any remaining debt after 20 years of payments, rather than the current 25 years.
Benefits of the Income Based Repayment Plan:
- The IBR Plans makes your monthly student loans payments more affordable.
- If your IBR payment amount doesn’t cover the interest that accumulates on your loans each month, the government will pay for any unpaid accrued interest on your loan for up to 3 consecutive years (from the date you begin repaying your loans under the IBR Plan).
- If you repay your loan under an IBR Plan, and meet certain other requirements, any remaining loan balance you owe will be canceled after 20 years.
- Loan payments made under a IBR Plan count towards the 120 payments required for the Direct Loan Public Service Loan Forgiveness (PSLF) Program.
For more information, and to see if you qualify for a Income Based Repayment Plan, please visit the StudentAid.ED.gov website.