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Pay Back Your Student Loans With an Income-Based Repayment Plan

If you are taking out student loans to help finance your college education, you may already be looking ahead to the various options you have for repaying your federal student loans or even reducing your college debt. And if you are already out of school and working, and your income is relatively low compared to your student loan debt, an Income-Based Repayment (IBR) Plan may be possible for you.
 

Do You Qualify for an Income-Based Repayment Plan?
 

You may qualify for an IBR plan if you prove that you have a partial financial hardship. This means that your payments under a 10-year Standard Repayment Plan are higher than what your monthly payments would be under an IBR. If you qualify for an IBR, your monthly payments will be an amount that is 15 percent of your discretionary income. Payments are based also on family size (in addition to your income) and are adjusted each year to take into account any changes. An added significant benefit is that the unpaid accrued interest on your loans (depending on their type) may be paid by the government for you for up to three years from the date you begin making IBR payments. In addition, any interest that accrues will not be capitalized. Those who meet certain other circumstances may qualify to have their remaining loan balance forgiven if they have made earnest payments for 25 years.
 

What Types of Loans Are Eligible for an Income-Based Repayment Plan?

Only certain types of student loans are eligible for IBR plans. They are:

  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • Direct PLUS Loans made to graduate or professional students
  • Direct Consolidation Loans without underlying PLUS loans made to parents
  • Subsidized Federal Stafford Loans
  • Unsubsidized Federal Stafford Loans
  • FFEL PLUS Loans made to graduate or professional students
  • FFEL Consolidation Loans without underlying PLUS loans made to parents

 

A few types of loans are excluded from IBR Plan eligibility. They are:

  • PLUS loans made to parents
  • Consolidation Loans that include underlying PLUS loans made to parents
  • Private education loans

 

To learn more about IBR Plans, qualifications, and limitations, visit the official Federal Student Aid information about IBR Plans.

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