Income-Based Repayment (IBR)

January 9, 2023

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This is one of several income-driven repayment (IDR) plans for federal student loans. It may be an option for borrowers who want to manage their loans under a repayment plan that bases their monthly payment on their income and household size; however, borrowers should evaluate all IDR plans before deciding on the best plan.

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Please note: new regulations will go into effect on July 1, 2023, and at that time, some of the information below will change. This fact sheet will be updated again in July 2023.

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). Verification of income and family size is required each year, and the borrower’s monthly payment will be adjusted annually.

The repayment term for IBR is up to 25 years (for those who borrowed before 7/1/2014) and 20 years (for new borrowers on or after 7/1/2014). Borrowers with a remaining loan balance at the end of the term are eligible for loan forgiveness through the plan; however, the amount forgiven is considered taxable income.

Who Qualifies for IBR?

Borrowers must demonstrate a Partial Financial Hardship (PFH) to qualify to enter this plan. Essentially, to meet this qualification, if a borrower’s monthly payment is lower than what the 10-year Standard monthly payment would be, it is likely that the borrower meets the PFH qualification.

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 amount (determined when entering IBR).
  • Currently, interest capitalization is postponed until a PFH no longer exists. 
  • 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)
How to Apply?

Submit the Income-Driven Repayment Plan Request form online at Studentaid.gov or contact your loan servicer.

Other Income-Driven Repayment Plans

For those who borrowed before 7/1/2014, IBR is the only income-driven repayment plan available for both FFEL and Direct Loans.

Example of a PGY-1 Resident Income-Based Repayment (IBR) (borrowed prior to 7/1/2014)*
Monthly Adjusted Gross Income (1) $5,070
(minus) 150% of Poverty Line (2) - $1,700
Discretionary income (3) = $3,370
(multiplied by) (4) x .15%
Monthly IBR Payment (5) = $510

(1) Based on AAMC estimate for the 2023 first post-M.D.-year median stipend ($60,800)
(2) Based on the 2022 federal poverty guideline for a family size of one in the 48 contiguous states
(3) Discretionary income is the difference between income and 150% of the poverty guideline for the borrower’s state of residence. (This example is based on a family size of one).
(4) Based on 2015 federal regulations.
(5) Rounded to the nearest $10 

*New borrowers on or after July 1, 2014, qualify for the “new” IBR plan. This IBR plan bases payment on 10% of a borrower’s discretionary income and household size. When evaluating repayment plans, new IBR and PAYE will have the same monthly payment amount; however, PAYE may lead to lower total repayment costs due to some features of the plan. Use the MedLoans® Organizer and Calculator (MLOC) to review estimated repayment options and costs to determine the best plan for you.  

 

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