Student Loan Law: Income-Based Repayment Basics

Student loan debt is increasingly becoming a much more prevalent issue for thousands of Americans.  Thousands of people face delinquency and default in their repayment plans, but many people are not aware of all of their repayment options.  In this post, I would like to highlight some of the basics involved in one payment method for federal student loans: income based repayment.

Income based repayment (or “IBR,” as it is often known) allows individuals to set up a monthly payment plan for the federal student loan debt based solely on income.  A formula is utilized which compares an individual’s income with the poverty line.  The result it often a much more affordable monthly payment than the standard, default repayment options.

As income changes, payments change as well.  Individuals must re-certify annually and provide updates on income so that the payment can be adjusted accordingly.

Additionally, there is a debt forgiveness component to income based repayment.  If a student participates in income based repayment for twenty-five (25)  years, any federal student loan debt tat remains after this 25 year period is forgiven.

While this isn’t always the best option for consumers, many consumers are not even aware that this option exists.  When dealing with federal student loans, It is important to understand all repayment options available to you so that you are properly equipped to select the option that works best for you and your family.

Anton Nickolai