IBR-Income Based Repayment

Sometimes the right loan repayment plan can totally revamp your ability to pay back your student loans and get rid of your student loan debt. Although you are required to select a repayment plan when you initiate repaying your student loan, you may change the repayment plan any time by contacting the borrower or by consolidating multiple student loans.

There are many repayment plans available for federal student loans such as standard plan, extended plan, graduated plan, income-driven plans, income-sensitive plans, and pay-as-you-earn plan. The selection of repayment plan depends on your income, type of loan, and personal preferences.

Income-Based Repayment Plan (IBR)

Income-based repayment plan is one of the most widely used income-driven loan repayment plans by students. With income-based plan, the loan repayment is made affordable to the borrower by capping the monthly installments based on their family size and monthly income. It also offers student loan forgiveness to students who make qualifying monthly payments for 25 years.

How does it Work?

The income-based loan repayment plan allows for a reduced monthly payment amount as compared to the standard repayment plan, which makes it a good option for graduates and professionals working on low-salaried jobs such as for those working in public service organizations.

For new student borrowers, who received a Direct student loan on or after July 1st, 2014 and have no remaining balance on an FFEL loan or on a Direct loan, the income-based repayment plan limits the monthly installment amount at 10 percent of the borrower’s discretionary income.

Students, who are not new borrowers, are required to pay back their student loans in monthly installments capped to 15 percent of their discretionary income.

The monthly payment is adjusted annually based on the income and family size.  Any remaining balance on the direct federal student loans is forgiven after 240 qualifying monthly payments.

Eligibility Requirements for Income-Based Repayment Plan

The applicant should be facing partial financial hardship as defined under the income-based repayment plan, which says that the annual amount due on the eligible student loans must be greater than 15 percent of the difference of borrower’s adjusted gross income and 150 percent of the poverty line based on their family size and the state of residency.

The following loans are eligible for the income-based repayment plan:

  • All direct unsubsidized and subsidized loans
  • All FFEL unsubsidized and subsidized loans
  • Direct and FFEL PLUS loans given to the students
  • Direct and FFEL Consolidation loans that do not include any PLUS loan given to parents
  • Federal Perkins Loans, if consolidated

Why Should You Choose the Income-Based Repayment Plan

The income-based repayment plan is best for students who have a high debt to income ratio and who are working at low-salaried jobs. Borrowers, who are facing temporary financial hardships, can also get benefited from this loan repayment plan.

If the borrower’s gross income is below or near 150 percent of the poverty line, the monthly payments made under the income-based repayment plan will be $0. A large family size also helps. Income-based repayment plan is a reasonable option for students who are defaulting on their student loans because of their low income. However, it ends up costing you more as compared to the standard repayment plan because payments are extended over a longer period.

How Global Loan Consolidation Can Help You?

In recent years, the Department of Education (DoE) has introduced several flexible loan repayment options to help students in paying their student loan debt on time. The income-based repayment plan is one of such flexible repayment plans that can make repaying less burdensome to you. However, not many people opt for these income-driven repayment plans because of unawareness and complicated enrollment process.

Global Loan Consolidation is a company that assists students in enrolling to various loan repayment plans. We help you determine the best repayment plan according to your needs and budget. Our team of experts makes the documentation process easier for you. We serve our customers with an approach centered on helping students in achieving a debt-free future.

Contact Global Loan Consolidation to determine your eligibility for the Income-based repayment plan. Call us at (888)538-2201  FREE.