American Student Assistance® (ASA) is happy to be able to offer information on a new repayment option called Income Based Repayment (IBR) . The IBR plan was created to help borrowers with high student loan debt and/or a low income.

 How Do I Qualify?

To qualify for IBR, you must display partial financial hardship. Your lender determines this by calculating the annual payment amount due on your eligible loans under a standard 10-year repayment plan. If this exceeds 15% of your discretionary income, then you are eligible. Your lender will then cap the total monthly payments on your eligible loans at 15% of your discretionary income. 

Once you enter an IBR plan, your lender will also recalculate your monthly payment amount based on a 10-year repayment schedule. This amount will be the maximum you’ll ever pay while in an IBR plan—even if you no longer demonstrate partial financial hardship.

 What Kinds of Loans are Eligible for IBR? 

IBR is available to you whether you’re in the Direct Loan Program or the Federal Family Education Loan Program. Most federal loans are eligible, but there are a few exceptions.

Eligible loans include:

– Subsidized and Unsubsidized Stafford Loans

– SLS Loans

– Grad PLUS Loans

– Consolidation loans without underlying Parent PLUS Loans

–  Perkins Loans may be included

 Will IBR Extend My Repayment Period? 

Yes. In most cases, IBR will extend your repayment period and increase the amount of interest you pay over the life of the loan.

 However, IBR has a safety valve that most other repayment plans do not. If you have an outstanding balance after repaying your loan for 25 years and making 300 eligible payments, your remaining debt is forgiven. Payments are eligible if they occur on or after July 1, 2009. You may prepay, but you will not be eligible for forgiveness until 25 years after you enter the plan. This means it is very possible that you will repay your loan in full before the necessary time passes.