Income Based Repayment Plan (IBR)

Last week we touched on the basics of the REPAYE repayment plan. This week we are going to be touching on the basics of the Income-Based Repayment Plan (IBR Plan). 

IBR is the third of four income-based student loan repayment options available for federal student loans. Under this repayment plan, your payment percentage of your discretionary income will depend on whether you’re a “new” borrower or not.

“New” borrowers are individuals who had no outstanding balance on a Direct Loan or a FFEL loan prior to receiving your direct loan on or after July 1, 2014. If you are a new borrower then your student loan payment is generally going to be 10% of your discretionary income, but the payment will never exceed the amount your payment would be under the 10-year standard repayment option.

For those who don’t qualify as a “new” borrower your payment will generally be 15% of your discretionary income. Under IBR your repayment period will be 20 years for “new” borrowers and 25 years for those who don’t qualify as a “new” borrower.

As with PAYE and REPAYE, discussed in prior weeks, the loan amount that is forgiven at the end of your repayment period will be considered taxable income (unless you qualified for public service loan forgiveness). You will need to recertify your income and family size every year in order to get your payments to be based on your income.