Struggling to make ends meet while paying off your federal student loans? You're not alone. But the good news is that help is available.
The government offers four income-based repayment plans — which adjust your monthly student loan payments based on how much money you make. Among the options is Income-Based Repayment, or IBR, which lowers student loan bills when you’re struggling to pay them. If you're interested in this option, here's what you should know.
What is IBR?
Do you qualify for IBR?
When is IBR a good idea?
How is payment calculated under IBR?IBR offers different terms for two sets of borrowers:
- For new borrowers on or after July 1, 2014, payments are capped at 10% of your discretionary income with a loan term extended to 20 years.
- For borrowers whose first loans were disbursed before July 1, 2014, payments are capped at 15% of your discretionary income with a loan term of 25 years.
Use our Income-Based Repayment Calculator to get an estimate of what your student loan payment would be under this plan. Or, if you're really into math, your discretionary income can be calculated by subtracting 150% of your state’s poverty level (based on household size) from your household income. Your annual payment is equal to 10% or 15% of this amount.
What are the pros and cons of IBR?
How do I enroll in IBR?
You can enroll in IBR by filling out an application through the government online. There is no application fee to complete this application, and the process only takes 10 minutes or less. You'll be asked about your financial situation, so be prepared with documents that prove your income, like a W-2.
Still not sure if IBR is for you? Check out other ways to lower your monthly payment.