Loan Consolidation, Repayment, and Forgiveness Programs
Income-Based RepaymentIncome-Based Repayment (IBR) is a new payment option for federal student loans. It can help borrowers keep their loan payments affordable with payment caps based on their income and family size. For most eligible borrowers, IBR loan payments will be less than 10 percent of their income—and even smaller for borrowers with low earnings. IBR will also forgive remaining debt, if any, after 25 years of qualifying payments for students who don’t qualify for Public Service Loan Forgiveness.
Who can use IBR?
IBR is available to federal student loan borrowers in both the Direct and Guaranteed (or FFEL) loan programs, and covers most types of federal loans made to students, but not those made to parents. Qualifying loans include Stafford, Perkins, and Grad PLUS loans. To enter IBR, the student has to have enough debt relative to their income to qualify for a reduced payment.
How does IBR make payments more affordable?
IBR uses a kind of sliding scale to determine how much the student can afford to pay on federal loans. If the student earns below 150 percent of the poverty level for his or her family size, the required loan payment will be $0. If the student earns more, the loan payment will be capped at 15 percent of whatever they earn above that amount. Except for the highest earners, that usually works out to less than 10 percent of the student’s total income.