Income Based Repayment Program

September 12, 2011

Income Based Repayment Program

The Income Based Repayment Program (IBR) is a fairly new concept for federal loan payment, and is an awesome addition to to traditional repayment program options. A basic definition of the Income Based Repayment Program is your monthly payment is based off a percentage of your monthly income, usually being around 15 to up to 20 percent, and can be used no matter what age your loan is as well as what type of education it was for.

This option of repayment doesn’t have any income requirements so you can use it for any income you earn. It can also be catered around your family size as well. The below information will provide you of an overview about qualifying loans as well as all the major details Income Based Repayment Program with the pros and cons.

income based repayment program

 

Income Based Repayment Program Eligibility

There are certain federal loan programs that are eligible for Income Based Repayment, and some are not. Here are the qualifying loan options that one cna use for IBR as well as the ones that do not qualify:

Qualifying Loans

  • Federal Stafford Loans.
  • PLUS Loans as well as loans in cosolidation if they are part of the Direct Student Loan Program as well as the FFEL Student Loan Program.

Non Qualifying Loans

  • Defaulted student loans.
  • Parent PLUS Loans as well as consolidated Parent PLUS Loans.

As far as personal qualifcations go for the Income Based Repayment Program, your payments start out higher if you have no kids and get lower if you have one or more children, getting lower for each child you have. These payments are changed if income and family size change. Here is an example of how this works:

  • 50,000 income level – 1 child – $421, 2 children – $349, 3 children – $278, 4 children – $206, 5 children – $134, 6 children - $63 and 7 children – $0.

Income Based Repayment Program Pros & Cons

Pros

  • You can start out with little or no payments, which can be great when you first get out of college and are looking for a job, and as your pay advances so can your payments, making your repayment period get shorter.
  • If after 25 years you still have debt on your student loans, you may be able to qualify for cancellation of whatever sum is left.
  • If you have Stafford Subsidized Loans (income based loans) and your Income Based Repayment Program total amount you pay doesn’t equal your interest payments, the government will pay for whatever builds up in the form of interest on your loans for up to a three year period from when you first began IBR.
  • You can also use student loan forgiveness with public service jobs where you work for 10 years and make 120 on time payments in which at the end of this period, whatever is left on your loan debt will be wiped away on certain loans. This option is available for Direct Loans as well as consolidating FFEL Loans.

Cons

  • You have to up date you information each year, proving what your income as well as family size is and any changes that have came up during the last year in either category. Not providing this information each year will result in your repayment automatically being placed in a standard repayment which is where you have to pay a monthly fee that will fully pay off your loan debt in 10 years.
  • Being that Income Based Repayement Program usually comes with a lot lower payments, this will extend the repayment period which will result in more interest payments.

Using Income Based Repayment Program

If you are interested in taking advantage of the Income Based Repayment Program, you will have to contact the servicer of your loans who take into account your information and altimately determine what payment amount you are eligible for.

Category: Income Based Repayment

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