Income Based Repayment

Content contributed by Edfinancial Services

Available July 1, 2009

Income Based Repayment (IBR) is a new method for repaying your federal student loan debt.  As of July 1, 2009, it will help make loan payments more manageable by calculating your payment amount based on your adjusted gross income (AGI) and family size.  In order to qualify, you must demonstrate a partial financial hardship (PFH), and if you do, your payments will be capped at 15% of your discretionary income.  While under this plan, your situation will be evaluated annually to determine if your PFH has continued.  There are additional benefits, such as, restricted capitalization, loan forgiveness, and interest subsidies that may also be available while on this repayment plan.

If you think IBR may be right for you, contact us to see if you qualify.

Read our frequently asked questions about IBR.

Here are some key terms associated with IBR:

Adjusted Gross Income (AGI): The borrower’s adjusted gross income as reported to the Internal Revenue Service (IRS). For a married borrower filing jointly, AGI includes both the borrower’s and spouse’s income, and for a married borrower filing separately, only the borrower’s income.

Family Size: The number that is determined by counting the borrower, the borrower’s spouse, and the borrower’s children, including unborn children who will be born during the year the borrower certifies family size, if the children receive more than half of their support from the borrower.  A borrower’s family size also includes other individuals if, at the time the borrower certifies family size, the other individuals live with the borrower and receive more than half their support from the borrower and will continue to receive support from the borrower for the year the family size is certified.  Support includes money, gifts, loans, housing, food, clothes, car, medical and dental care, and payment of college costs.

Partial Financial Hardship (PFH): 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, exceeds 15% of the difference between the borrower’s adjusted gross income and 150% of the poverty line for the borrower’s family size.

Poverty Line Income: The income categorized by State and family size in the Poverty Guidelines published annually by the United States Department of Health and Human Services (HHS) pursuant to 42 U.S.C. 9902(2). If a borrower is not a resident of a State identified in the Poverty Guidelines, the borrower’s family line income is the income used for the 48 contiguous States.