What is income-based repayment?
Income-Based Repayment (IBR) is a federal student loan repayment program that allows borrowers to reduce their payments based on their household size, location, and area of residence.
The program caps borrower payments at either 10% or 15% of their discretionary income for a term of 20 or 25 years, depending on when the loans were disbursed.
It is one of four common income-driven repayment (IDR) plans offered by the federal government for those that have high debts relative to their incomes. Income-based repayment is only an option for those that are federal student loan borrowers.
For reference, the other three IDR plans are:
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Income Contingent Repayment (ICR)
REPAYE is in the process of being replaced by the new SAVE plan, which will become live before the Fall of 2023.
Our calculator will compare your expected payments under each of the four income-based repayment plans, and you will then be able to choose which one works best for you.
Our income-based repayment calculator
Our updated income-based repayment student loan calculator will model what your monthly payments will look like once your federal payments resume again this year. Our calculator model includes all of the most common IBR details, including:
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Updated 2023 federal poverty data used to calculate your monthly discretionary income
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The difference between the two different types of IBR, depending on when your loans were disbursed
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All of the eligibility information you need to be on top of
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The methodology used by the program to determine what you can afford to pay
Keep in mind that these models are complex, so the projected payments that you see here are unlikely to be a perfect match to what your loan servicer calculates. Our calculator is designed to be a good tool to help you decide what repayment plan(s) may be for you. But we can promise that our tool is the most recent of any you'll find on the Internet.
Basic IBR eligibility information
There are actually two different IBR plans depending on when your loans were issued (before or after 7/1/2014). Your payments will be calculated as follows:
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10% of your discretionary income if your loans were issued after 7/1/2014
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15% of your discretionary income if your loans were issued before 7/1/2014
Do keep in mind, however, that your payments at no point will be greater than what they would have been under your 10-year standard payment amount. But this 7/1/2014 date also impacts the term of your repayment under IBR. Those are as follows:
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20 years if your loans were borrowed after 7/1/2014
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25 years if your loans were borrowed before 7/1/2014
If you are considering IBR now, with loans issued after 7/1/2014, then you'll be part of the "New IBR" program where you'll pay 10% of your discretionary income for 20 years before becoming eligible for loan forgiveness. Otherwise, you'll partake in "Old IBR."
Essentially, "new" IBR carries the same expected payment and loan term as Pay as You Earn does.
Regardless of whether you are utilizing the "New" or "Old" IBR plan, you will gain eligibility for forgiveness after satisfying these terms.
This means that, at the conclusion of either 20 or 25 years of payments, the federal government will forgive your remaining balance. One thing that you need to keep in mind is the idea of something known as the "IDR tax bomb" in which your forgiven federal loan balance may be treated as taxable income.
Now, this is temporarily suspended through the beginning of 2026 after Congressional legislation during the Covid-19 pandemic, but whether or not this gets extended seems to be anybody's best guess at this point.
It is also possible that these revised loan terms will lead you to pay off your loans before the end of the loan term, and if that is the case, then you are also student debt-free. And in this instance, the potential tax impacts will not apply, as you technically are not receiving any forgiveness.
What federal loan types are eligible for income-based repayment?
Eligible Direct and FFEL federal loan types for income-based repayment include the following:
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Direct Subsidized Loans
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Direct Unsubsidized Loans
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Direct PLUS Loans made to graduate or professional students
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Direct Consolidation Loans that did not repay any PLUS Loans made to parents
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Subsidized Federal Stafford Loans (from the FFEL Program)
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Unsubsidized Federal Stafford Loans (from the FFEL Program)
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FFEL PLUS Loans made to graduate or professional students
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FFEL Consolidation Loans that did not repay any PLUS loans made to parents
Again, only these federal loans are eligible.
IBR, and all IDR plans, are not available to students or former students with private student loans or Parent PLUS loans. Also, note that Federal Perkins Loans become are eligible, but only if consolidated via a Federal Consolidation Loan first.
Those with private student loans may want to consider private refinancing if possible.
Applying for Income-Based Repayment
Deciding whether to apply for IBR has never been easier thanks to our calculator. If you decide that applying for income-based repayment is for you, you'll want to complete the following process:
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Login to the federal student aid website using your FSA ID
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Complete the Income-Driven Repayment Plan Request form
It's that easy! And if you'd prefer, you can also apply by mail if that is easier for you.
To apply for IBR, you'll need to supply the following information for your application to be processed.
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Your social security number
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Address and phone number
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The income-driven repayment plan you'd like to join
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Who your current loan servicer(s) are
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The status of your loan repayment (active, deferment, forbearance, etc.)
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The number of children and dependents in your household
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Income information
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Spouse's income information, tax info, and student loan status (if applicable)
Income-Based Repayment frequently asked questions
What will happen to my monthly payments under IBR?
The goal of using an income-based repayment plan - or any IDR plan - is to reduce your monthly payment and spread your payments out over a greater number of years, lessening your burden per month. After all, if you were paying more, you wouldn't use the plan.
If you reach a point over the 20/25 years where your monthly payment increases to more than what your original standard monthly payment was - and this will only happen if you start making a lot more money - you can still continue onward with IBR, but the most that you will pay is your original 10-year standard payment amount.
How are IBR payments calculated?
Under IBR, and all IDR plans, your payments are calculated as follows:
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Take your prior year's Adjusted Gross Income (AGI) or income, whichever is lesser
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Consider the number of dependents you have in your household
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Subtract 150% of the federal poverty line from your AGI/income and divide by 12 (months). This difference between your income and 150% of the federal poverty line is oftentimes referred to as your discretionary income.
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Take either 10% or 15% of this figure, depending on whether you are eligible for Old IBR or New IBR.
Don't worry - our calculator does all of this for you behind the scenes!
Am I locked into IBR for the remainder of my term?
No. While you technically sign up for the term on the payment, you are allowed to make changes if you want to (or if your circumstances change).
To lessen the chances of continuously changing repayment strategies, you should consider budgeting your student loan payments each month.
Will income-based repayment be more advantageous for me than the other IDR plans?
It depends on your household's unique income status, family size, and other factors. Our calculator will model out your loan situation across IBR, PAYE, and REPAYE though, so there is no need to worry. But income-driven repayment carries far more complexities than just knowing what your monthly payments could look like.
Do I need to apply for acceptance into the IBR program?
Yes, there is an application process to take part in the Income-Based Repayment program. It goes like this:
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You must complete the Income-Driven Repayment Plan Request Application. This form should be available to you through either your loan servicer and/or via the link above, which is directly from the Student Aid government website.
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While completing the form, you'll find that you have three main options. First, you can directly apply for the IBR program. Secondly, you can fill out the form with the intention of enrolling in the plan with the lowest monthly cost. And your third option is for your annual income recertification.
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Do keep in mind, though, that if you choose option one, you will only be considered for IBR, meaning you may not realize if there are better options available to you.
Therefore, you may find it wise to have your loan servicer provide you with all the information regarding all of the plans that you are eligible for.
What is all this talk about "discretionary income"?
Again, your monthly discretionary income is defined as the difference between your income and 150% of the federal poverty line for your geographic area and household size.
Usually, the more money that gets reported on the adjusted gross income (AGI) line of your tax return, the more the federal government is going to assume that you can pay.
Is income-based repayment forgiveness taxable?
Unfortunately, any end forgiveness that you receive off IBR can be treated as taxable income. And while Congress has taken action to waive this through the end of 2025, there is no guarantee that this will be extended or made permanent, though there are active proposals floating around Congress.
If you're pursuing forgiveness through income-based repayment, you need to be aware of and begin to prepare for it.
The same is true with Income Contingent Repayment, Pay as You Earn, and Revised Pay as You Earn as well. This is known as the income-driven repayment tax bomb.
How does marriage affect income-based repayment payments?
Great question. With income-based repayment, your payments will be based on just your income if you file your taxes "married filing separately." If you file your taxes jointly, then your projected payments will take your spouse's income into account.
Now, deciding how to file your taxes is very much a personal decision that you should consult a tax expert on, but there are tradeoffs to each strategy.
We've written a whole page dedicated to explaining how marriage affects your student loan payments.
Will your calculator show me how my income-based repayment payments may change?
Yes! Our student loan calculator has a built in model that can take things into account like your future income projections, family changes, and more. Generally, the further into the future that you try to model, the less accurate the projections get, but here, the accuracy of our model is largely dependent on three factors:
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Whether your income estimates prove true
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Whether you actually have children when you estimate you may
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What happens with inflation and the federal poverty line (which plays a large role in estimating your future payments)
Generally, the more you make, the less children you have, and the lower that inflation is, the more you can expect to pay each year.
The other income-driven repayment plans
Our calculator will also compare your expected payments across all of the income-driven repayment plans offered by the federal government. Below is some base information for the other IDR plans for your reference.
Income-Contingent Repayment (ICR)
ICR has largely become a non-starter, as it is the only IDR plan that requires you to pay 20% of your monthly discretionary income as your payment. For context, the other plans are all either 10% or 15%.
Because it carries benefits that are not quite as lucrative, income-contingent repayment is available to anybody with federal student loan debt.
Pay as You Earn (PAYE)
Like we mentioned above, calculating your PAYE payment is actually identical to what you'd pay under the "New" IBR plan, but it comes with a potential benefit that you should be aware of. As explained in Forbes, "One of the advantages of the PAYE plan is that by filing separate tax returns from your spouse, you can prevent their income from figuring into the calculation. This can be really handy if you earn a lower income than your spouse."
So while you'll have to do the math and compare whether potentially paying more in taxes (by virtue of not filing jointly) could actually save you more because of your lower expected student loan payments, the option is at least there.
Learn more about how getting married can change your student loan repayment.
Revised Pay as You Earn (REPAYE)
The newest IDR plan to be implemented, REPAYE sets the following parameters around your expected payments:
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Your monthly payments will be 10% of your monthly discretionary income
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Forgiveness granted after 20 years (for undergraduate loans) and 25 years (for graduate loans)
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REPAYE's most unique feature is the presence of a student loan interest subsidy, where 100% of unpaid interest is covered each month for subsidized loans. And even if you have unsubsidized loans, this figure if 50%.
Who is income-based repayment right for?
The first step is to ask yourself if one of the income-driven repayment plans is right for you.
If so, you'll need to figure out which one. And unfortunately, the answer to this question is not as simple as just selecting the strategy that has the lowest monthly payments or the lowest projected balance paid over the term of the loan. Each program is a little different, and these differences can really impact the course of your student loan repayment.
For example, REPAYE carries an interest subsidy that can lower your total repayment costs, potentially by more than under other IDR plans. On the flip side, REPAYE does not cap your payments based on your standard repayment amount, so there are a lot of moving pieces to be aware of here.
Worried about making a mistake? No problem! Let our student loan experts create a customized student loan plan for you!
State student loan forgiveness program alternatives
If you find that none of the income-driven repayment plans are viable options for you, you'll likely want to consider many of the state-sponsored forgiveness programs out there. Navigate our state by state guides using the buttons below.