Income-Based Repayment (IBR) Q&A

1. What is Income-Based Repayment?

A: Income-Based Repayment (IBR) is a federal program developed to assist borrowers who are having difficulty making their payments because they have high student debt levels relative to their incomes. The program is available for Stafford Loans, PLUS Loans to graduate students and Consolidation Loans with no underlying parent PLUS Loans. Borrowers must exhibit a partial financial hardship (PFH) as defined by federal regulations to enroll in an IBR plan. PFH is based upon the borrower's income, poverty level for the borrower's state of residence, family size and student loan indebtedness. Each borrower must recertify family size and income each year. This plan became available July 1, 2009.

2. Who sets the poverty guidelines?

A. The poverty guidelines are established annually by the U. S. Department of Health and Human Services.

3. What is a partial financial hardship (PFH)?

A. A circumstance in which the annual aggregate amount due on all of a borrower's eligible Federal Family Education Loan Program (FFELP) and Federal Direct Loan Program (FDLP) Loans, as calculated under a standard repayment plan based on a 10-year repayment period at the time the borrower initially entered repayment, exceeds 15 percent of the difference between the borrower's adjusted gross income (AGI) and 150 percent of the poverty line for the borrower's family size.

PFH = (Initial Standard Repayment Amount * 12) > 15% [AGI - (150% Poverty line applicable to family size)]

4. What happens if I qualify for partial financial hardship?

A. Your monthly payment amount during a period of partial financial hardship will be calculated as follows:

15%[AGI - (150% Poverty line applicable to family size)]/12

  • The monthly payment amount may be equal to or less than the accrued interest.
  • The monthly payment amount may be $0.
  • The partial financial hardship payment will be effective for one year. Each year your adjusted gross income and family size must be recertified and your partial financial hardship payment recalculated.
  • If the calculation indicates that you no longer have a partial financial hardship, your monthly payment will be based on a 10-year term calculated on your eligible student loan balances at the time that you became eligible for IBR. Any accrued, unpaid interest will be capitalized (added to your outstanding principal balance).

5. Is there a convenient calculator I can use to see if I might be eligible for IBR?

A. Following is a link to a calculator developed by the U. S. Department of Education.

6. What other options are available to help lower payment amounts?

A. There are deferments, which postpone payments during certain eligible periods, such as unemployment, economic hardship, military, etc. Also available are forbearances which postpone or reduce monthly payments for a limited period of time. There are additional repayment plans available such as income-sensitive, graduated and extended.

7. What student loans are eligible for IBR?

A. Federal Family Education Loan Program (FFELP) Loans and Federal Direct Loan Program (FDLP) Loans are eligible for an IBR plan, except loans that are in default, PLUS Loans made to parent borrowers, or Consolidation Loans that repaid PLUS Loans made to parent borrowers.

8. What student loans are not eligible for IBR?

A. Loans not eligible for the IBR plan include a private education loan, a loan in default, a Perkins Loan, a HEAL loan, a PLUS Loan made to a parent borrower, and a Consolidation Loan that repaid a parent PLUS Loan.

9. I am supporting members of my family other than my immediate spouse and children; do they count in the family size classification?

A. Your 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 they will receive more than half of their support from you. It includes other people only if they live with you now, they receive more than half of 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.

10. My spouse and I file a joint federal tax return, but I am the only one with student loan debt; how does this calculation work?

A. The total AGI of both spouses is used in the calculation for married couples that file joint federal tax returns, even if only one has student loan debt. However, if married couples file separate tax returns, only the AGI of the borrower is used in the determination of partial financial hardship.

11. How do I qualify for the forgiveness?

A. If you have a balance remaining after 25 years, the remaining balance could be written off if ALL of the following conditions are met:

  • You must have qualified for an IBR repayment plan at least once;
  • You must have a combination of 300 months covered by eligible payments and/or Economic Hardship Deferments beginning no earlier than July 1, 2009; and
  • 25 years must have elapsed (this means the very earliest a forgiveness could occur would be the year 2034).

12. Are there other factors to consider before applying for IBR?

  • As with other repayment plans that reduce the payment amount or extend the term, more interest will accrue, and, therefore, the total cost of the loan will increase.
  • Your AGI will probably increase in the future, which would mean that your IBR payment would increase accordingly.
  • A period of zero-payment will have a neutral effect on becoming eligible for borrower benefits through CFI. When your payment amount increases, the eligibility counter will resume for on-time payments.
  • IBR is not the only option to give you relief from your current financial difficulty. Please be sure to explore your eligibility for deferments, forbearances, and other repayment options that might provide more flexibility and lower total cost.

13. How do I apply for IBR?

A. Call our office at (800) 722-2838 (toll-free) to request that an application be mailed to you. Complete the application in full and return it with a signed copy (including both sides) of the your most recent federal tax return (Form 1040, 1040A, or 1040EZ). If you e-signed your tax return and filed your taxes electronically, you must print a copy in the normal 1040 format, sign it and send it (or a copy) with your IBR application. Just to be clear, regardless of your method of tax filing, the tax documentation you need to provide must have your actual signature on the tax return.

NOTE: You are not required to provide copies of any other tax return forms, schedules, attachments, or worksheets, including W-2 Forms.

14. I have a Consolidation Loan with a repayment period that is more than 10 years. If I no longer qualify for partial financial hardship, will I then be required to repay my loan based on a 10-year repayment plan?

A. Yes. If you are repaying under the IBR plan and you no longer qualify for partial financial hardship, your monthly payment will be based on a 10-year term calculated on your eligible student loan balances at the time you became eligible for IBR. This payment amount may be higher than your payment amount based on the term currently associated with your Consolidation Loan.

15. What if I decide I no longer want to repay under IBR?

A. You may elect to no longer pay under the IBR plan; however, if you were to make this election, your payment amount would be recalculated to ensure that your loans would be repaid within the actual allowable loan term remaining associated with your loans initially.