How Does IBR Work?
Income-Based Repayment “caps” loan payments at 15% of your discretionary income (for those who borrowed before 7/1/2014) and 10% of your discretionary income (for new borrowers after 7/1/2014). The monthly payment is adjusted annually and verification of your income and family size is required each year.
The repayment term for IBR is up to 25 years (20 years for new borrowers after 7/1/2014). After 25 years (or 20 years for new borrowers after 7/1/2014), any remaining loan balance will be forgiven; however, the forgiven amount is taxable.
Who Qualifies for IBR?
To qualify for the plan, borrowers must have a Partial Financial Hardship (PFH). Most medical residents will likely exhibit this hardship; however, the loan servicer(s) determine a borrower’s eligibility. Additional qualifying information can be found on the Federal Student Aid website.
Which Loans Qualify for IBR?
- Direct or FFELP Stafford and Consolidation Loans
- PLUS Loans (not to parents)
- Perkins and LDS Loans (only if part of a Consolidation Loan)
What are the Benefits of IBR?
- Payments are tied to household income and family size.
- The maximum payment is capped at the Standard 10-year repayment plan (determined when entering IBR).
- Postponement of interest capitalization occurs until a PFH no longer exists. Capitalization could be postponed until residency is over.
- A partial interest subsidy is available for the first three years on subsidized loans. There is no limit to how much interest can capitalize.
- The IBR repayment plan is a qualifying plan for Public Service Loan Forgiveness (PSLF)
What is the Payment Amount?
To help determine your monthly payment under IBR, use the MedLoans® Organizer and Calculator.
How to Apply?
Submit the Income-Driven Repayment Plan Request form online at Studentaid.gov, or contact your loan servicer.
Example of a PGY-1 Resident in IBR (borrowed prior to 7/1/2014)*
|Monthly Adjusted Gross Income(1)||$4,940|
|(minus) 150% of Poverty Line(2)||- $1,620|
|Discretionary income||= $3,320|
|(multiplied by)(3)||x .15%|
|Monthly IBR Payment (4)||$500|
(1) Based on AAMC estimate of 2021 first post-M.D. year median stipend
*New borrowers on or after July 1, 2014, qualify for the “new” IBR plan. The “new” IBR plan bases payment on 10% of the borrower’s discretionary income. When evaluating repayment plans, the “new” IBR and the PAYE plan will have the same monthly payment; however, the PAYE plan may lead to lower total repayment cost.
For those who borrowed before 7/1/2014, IBR is the only income-driven repayment plan available for both FFEL and Direct Loans.