The Income-Based Repayment (IBR) plan was introduced in the College Cost Reduction and Access Act (CCRAA) under section 493C of the Higher Education Act (HEA) for Family Education Loan Program (FFELP) and Federal Direct Loan Program (FDLP) loans. The IBR plan is designed to make loan repayment easier for borrowers with high debt levels but low salaries and is available on July 1, 2009. The plan:
• Who do I contact if I have questions?
• What loan types are eligible?
• What loan types aren't eligible?
• What's a partial financial hardship?
• What's the definition of family size?
• What documentation must be provided?
• What if no documentation is provided?
• What are the terms of the IBR plan?
• How are IBR payments applied?
• Can I make my loan payments early?
• How is the 25-year period counted?
• What are the standard repayment levels?
• What counts as an eligible payment?
• What doesn't count as an eligible payment?
• What if I want to consolidate my loans that are in IBR?
• What happens when I no longer have a partial financial hardship?
• What are the conditions for loan forgiveness?
• When is interest capitalized?
• Can I leave IBR?
• Where can I find additional information and an IBR calculator?
If you have any questions about the Income-Based Repayment Plan, contact your lender. « Back
Loans that are eligible for IBR include:
Loans that aren't eligible for IBR include:
A partial financial hardship (PFH) occurs when the combined yearly amount due on all of your eligible loans (as calculated under a standard 10-year repayment plan at the time you entered repayment) exceeds 15% of the difference between your adjusted gross income (AGI) and 150% of the poverty guideline for your family size.
Calculation Formula
standard 10-year repayment plan > 15% [AGI – (150% poverty line applicable to family size)]
In determining a payment amount, the AGI you’ll use depends on whether:
The poverty line income is categorized by your state of residence and family size in the guidelines published annually by the U.S. Department of Health and Human Services. If you aren't a resident of a state identified in the guidelines, your poverty line income is the income listed for the 48 contiguous states.
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Your family size includes:
Support includes:
An Interim IBR Application and an Alternative Documentation of Income Form are available for you to complete and submit to your lender(s). We'll provide updates and links to the official application as soon as it's released by the Department of Education.
If you have eligible loans held by two or more loan holders, you must contact each loan holder separately to request IBR. The loan holder(s) must include all eligible loans held by them in the IBR plan, unless you request otherwise.
Each loan holder must include the loan amounts of all eligible loans held by other lenders/servicers in the payment calculations, then prorate based on the principal amount held by that lender/servicer.
You must provide documentation of PFH eligibility to all of your loan holders both for the initial determination of eligibility and for each subsequent year for:
The partial financial hardship eligibility and the minimum monthly payment amount is initially evaluated and re-evaluated annually.
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Your loan holder will provide you with repayment option information within the six months before your first payment is due. You have 45 days to select a repayment plan. If you select the IBR plan but don't submit documentation you'll be placed in a standard repayment plan.
If you are in the IBR plan and don't submit the required verification each year, you will be placed in a standard repayment plan.
Under the standard repayment plan, the loan is required to meet the annual $50 monthly minimum payment and $600 annual payment amount. Your repayment period is based on the recalculated payment amount and may exceed 10 years.
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The IBR plan term can extend beyond 10 years regardless of the amount of eligible debt.
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IBR payments must be applied in the following order:
You may prepay all or part of a loan at any time without penalty. Forgiveness may not occur until the end of the 25-year period.
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Counting begins on the date you made an eligible payment or received an economic hardship deferment before qualifying for IBR and can begin no earlier than July 1, 2009.
After 25 years, any remaining debt is forgiven. No forgiveness will be granted before July 1, 2034. Any loan amount forgiven may be taxable.
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There are three types of standard repayment levels in IBR.
All payments made on or after July 1, 2009 could potentially be eligible if the payments fall into one of these categories:
The following payments don't count as eligible payments for IBR:
If you consolidate, the 25-year period starts over. Any payments or deferments received on underlying loans prior to consolidation don't count.
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If at one time it was determined you had a partial financial hardship, you may remain in the IBR plan if your eligibility ceases.
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Interest must be capitalized:
Interest may be capitalized:
When you choose to leave IBR completely, your repayment period will be limited to the number of months in repayment used under the IBR plan. This means that the number of months you were in IBR will count against the remaining months available in other repayment plans. Also, your payment amount may be higher than it was before entering IBR.
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More information and a calculator to estimate payment amounts under the IBR plan are available on the U.S. Department of Education's Web site.
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