Income-Based Repayment (IBR)
Income Based Repayment (IBR) is available for Direct Loans and FFELP Loans. However, Parent PLUS loans and loans that are in default are not eligible. During IBR, your monthly payments are based on your eligible federal student loan debt, income, family size, and state of residence and it is designed to help borrowers experiencing "partial financial hardship". (You are considered to have a partial financial hardship if the annual amount due on all of your eligible loans exceeds 15%* of the difference between your adjusted gross income (AGI), as shown on your federal income tax return, and 150% of the poverty line amount for your family size.)
If you are approved for IBR, you are required to reapply each year by submitting a new Income-Driven Repayment Plan Request form that will provide us with your updated income and family size information. If your annual income and family size information is not received by your annual renewal date, your payment will increase to what you would be required to pay under a Standard 10-year repayment plan. If your loan(s) is not repaid in full after you have made the equivalent of 25 years* of qualifying monthly payments and at least 25 years have elapsed, any remaining debt will be eligible for forgiveness.
There are additional benefits such as restricted interest capitalization and interest subsidies that may also be available while on this repayment plan.
Interest Subsidy
If you have subsidized loans and your monthly payment amount under IBR is not sufficient to pay the amount of interest that accrues on a monthly basis, the federal government will subsidize 100% of the remaining interest that is due for the first three consecutive years. Under the IBR plan, you are responsible for all the interest that accrues on your unsubsidized loans, as well as all of the interest that accrues on your subsidized loans after the end of the three-year interest subsidy period.
How to Apply
In order to apply for IBR, you must complete the "Income-Driven Repayment Plan Request" form. Return the completed form and any required documentation to the address shown in Section 10. You may be able to complete your request online by visiting https://studentaid.gov.
Key Terms
Adjusted Gross Income (AGI)
This is the borrower's adjusted gross income as reported to the Internal Revenue Service (IRS). For a married borrower filing separately, AGI includes only the borrower's income and for a married borrower filing jointly, AGI includes both the borrower's and spouse's income. If you are married and file your taxes jointly, and your spouse has eligible student loans, his or her loan debt may also be included as part of your eligible loan debt.
If you believe that your AGI, as reported on your most recently filed federal income tax return, does not reasonably reflect your current income (and/or your spouse's current income), you may complete the Alternative Documentation of Income form and provide proof of your current income.
Family Size
Family Size includes you, your spouse, and your children (including unborn children who will be born during the year for which you certify your family size), if the children will receive more than half their support from you. It includes other people only if they live with you now, they receive more than half their support from you now, and they will continue to receive this support from you for the year that you certify your family size. Support includes money, gifts, loans, housing, food, clothes, car, medical and dental care, and payment of college costs.
Partial Financial Hardship (PFH)
Hardship is a circumstance in which the annual aggregate amount due on all of a borrower's eligible FFEL and Direct loans, as calculated under a standard repayment plan based on a 10-year repayment period at the time the borrower initially entered repayment, or the amount owed when the borrower selects the IBR plan, whichever is greater, exceeds 15% of the difference between the borrower's adjusted gross income and 150% of the poverty line for the borrower's family size.