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Income-Based Repayment Plan

The information below describes the Income-Based Repayment (IBR) Plan for federal student loans. It includes the IBR eligibility requirements, the benefits of IBR, an IBR payment calculator, and some examples of how a borrower's monthly student loan payment amount can be reduced under IBR. For a PDF version of this information, please click here.

Income-Based Repayment Questions and Answers (Q&As;)

For additional information on IBR, check out the Income-Based Repayment Q&As.; The Q&As; are grouped into six categories: General Information, Eligible Loans, Determination of IBR Monthly Payment Amount, Married Borrowers, Application Process, and Other Information. The answers are dated and, as new questions are added or a previous response is updated, we will include a new date.

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What is Income-Based Repayment?

Income-Based Repayment (IBR) is a repayment plan for the major types of federal student loans that caps your required monthly payment at an amount intended to be affordable based on your income and family size.

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What federal student loans are eligible to be repaid under an IBR plan?

Any Stafford, Grad PLUS or Consolidation loan made under either the Direct Loan or FFEL program is eligible for repayment under IBR, EXCEPT loans that are currently in default, parent PLUS Loans, or consolidation loans that repaid a parent PLUS Loan. The loans can be new or old, and for any type of education (undergraduate, graduate, professional, job training).

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Who is eligible for IBR?

You may enter IBR if your federal student loan debt is high relative to your income and family size. While your lender will perform the calculation to determine your eligibility, you can use the Department's IBR calculator to estimate if you would likely benefit from the IBR plan. It looks at your income, family size, and state of residence to calculate your IBR monthly payment amount. If that amount is lower than the monthly payment you would be required to pay on your eligible loans under a 10-year standard repayment plan, based on the greater of the amount you owed on your loans when they initially entered repayment, or the amount you owe at the time you request IBR, then you are eligible to repay your loans under IBR.

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What are the benefits of IBR?

• PAY AS YOU EARN - Under IBR, your monthly payment amount will be less than the amount you would be required to pay under a 10-year standard repayment plan, and may be less than under other repayment plans. Although lower monthly payments may be of great benefit to a borrower, these lower payments may result in a longer repayment period and additional interest.
  
  
• INTEREST PAYMENT BENEFIT - If your monthly IBR payment does not cover the monthly interest that accrues on the loans, the government will pay your unpaid interest on Subsidized Stafford Loans (either Direct Loan or FFEL) for up to three consecutive years from when you first enter IBR repayment. After three years, and for all the other types of loans, interest that accrues will be capitalized (added to the loan principal on which future interest is calculated) when the borrower no longer is eligible for an IBR repayment amount.)
  
  
• 25-YEAR CANCELLATION - If you repay under the IBR plan for 25 years and meet certain other requirements, any remaining balance will be cancelled.
  
  
• 10-YEAR PUBLIC SERVICE LOAN FORGIVENESS If you work in public service and have reduced loan payments through IBR, your remaining balance after ten years in a public service job could be cancelled if you made loan payments for each month of those ten years. The Public Service Loan Forgiveness Program is available only if you have Direct Loans and you make 120 monthly payments under the Direct Loan Program. If you have FFEL loans, you may be eligible to consolidate them into the Direct Loan Program to take advantage of the Public Service Loan Forgiveness Program. However, only the payments made while in the Direct Loan Program will count toward the required 120 monthly payments. For more information about this program, review the Departments Public Service Loan Forgiveness Program Fact Sheet.

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What are the disadvantages of IBR?

• YOU MAY PAY MORE INTEREST The faster you repay your loans, the less interest you pay. Because a reduced payment in IBR generally extends your repayment period, you may pay more total interest over the life of the loan.
  
  
• YOU MUST SUBMIT ANNUAL DOCUMENTATION To set your payment amount each year, your lender needs updated information about your income and family size. If you do not provide the documentation, your payment reverts to the standard 10-year repayment amount.

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How is the IBR amount determined?

Under IBR, the amount an eligible borrower would repay each month is based on the borrower's Adjusted Gross Income (AGI) and family size. The annual IBR repayment amount is 15 percent of the difference between the borrower's AGI and 150 percent of the Department of Health and Human Services Poverty Guidelines, adjusted for family size. That amount is then divided by 12 to get the monthly IBR payment amount.

The following chart shows the maximum IBR monthly payment amounts for a sample range of incomes and family sizes.

IBR Monthly Payment Amount
Annual Income	Family Size
	1	2	3	4	5	6	7
$10,000	$0	$0	$0	$0	$0	$0	$0
$15,000	$0	$0	$0	$0	$0	$0	$0
$20,000	$47	$0	$0	$0	$0	$0	$0
$25,000	$109	$39	$0	$0	$0	$0	$0
$30,000	$172	$102	$32	$0	$0	$0	$0
$35,000	$234	$164	$94	$24	$0	$0	$0
$40,000	$297	$227	$157	$87	$16	$0	$0
$45,000	$359	$289	$219	$149	$79	$9	$0
$50,000	$422	$352	$282	$212	$141	$71	$1
$55,000	$484	$414	$344	$274	$204	$134	$64
$60,000	$547	$477	$407	$337	$266	$196	$126
$65,000	$609	$539	$469	$399	$329	$259	$189
$70,000	$672	$602	$532	$462	$391	$321	$251

After the initial determination of your eligibility for IBR, your payment may be adjusted each year based on your income and family size, but your required payment will never be more than the standard 10-year payment amount (unless you choose to exit the IBR program).

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Are there examples of borrowers who are eligible for IBR and for borrowers who are not?

Example 1 - Based upon the IBR repayment formula a borrower with a family size of one and an AGI of $30,000 would have an IBR calculated payment amount of $172 per month. If this borrower had total eligible student loan debt of $25,000 when the loans initially entered repayment, and the loan balance had increased to $30,000 when the borrower requested IBR, the calculated monthly repayment amount under a 10-year standard plan would be based on the higher of the two amounts. Using an interest rate of 6.8 percent, the 10-year standard payment amount for $30,000 would be $345. Since the $172 IBR calculated amount is less than the 10-year plan amount of $345, the borrower would be eligible to repay under IBR at a monthly amount of $172. However, if this borrower's total eligible loan debt used to calculate the 10-year standard amount was only $10,000 the 10-year standard payment would be $115 per month, which is less than the IBR amount of $172. Thus, the borrower would not be eligible for IBR.

Example 2 - A borrower with a family size of four and income of $50,000 would have an IBR calculated monthly payment amount of $212. If this borrower had total eligible student loan debt of $20,000 when the loans initially entered repayment, and this amount had not changed when the borrower requested IBR, the calculated monthly repayment amount under a 10-year standard plan with an interest rate of 6.8 percent would be based on $20,000. Using an interest rate of 6.8%, the 10-year standard payment amount for $20,000 would be $230. Since the $212 IBR calculated amount is less than the 10-year plan amount of $230, the borrower would be eligible to repay under IBR at a monthly amount of $212. But, if this borrower’s total eligible loan debt used to calculate the 10-year standard amount was $15,000, the 10-year calculated amount would be $173 per month, which is less than the IBR amount of $212. This borrower would not be eligible for IBR.

For more information on other repayment plans and calculators, click here.

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How Do Borrowers Apply for IBR?

To apply for IBR, contact your loan servicer. If you don’t know who your loan servicer is, go to www.nslds.ed.gov to find out.

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IBR Calculator

Last updated/reviewed July 14, 2010