IBR Plan (Income-Based Repayment)

Income-Based Repayment (IBR) is the oldest federal income-driven repayment plan and the most widely available. Unlike PAYE or SAVE, IBR is open to almost any borrower with eligible federal loans, regardless of when you first borrowed.

Two versions: new borrower vs. older borrower

Federal regulations split IBR into two cohorts based on when you first took out federal loans:

• New borrowers (no outstanding federal loans as of July 1, 2014): payment = 10% of discretionary income, forgiveness after 20 years.
• Older borrowers: payment = 15% of discretionary income, forgiveness after 25 years.

The difference compounds: a borrower with $80,000 in loans on the older IBR rules will often pay significantly more than the same borrower on PAYE or new-borrower IBR.

Standard cap

Like PAYE, IBR caps your monthly payment at what you'd pay under the Standard 10-year Plan. Your payment can never exceed the un-extended amount.

Eligibility

Most federal loans qualify for IBR, including Direct Loans and most FFEL loans. Parent PLUS loans are not directly eligible, but a Parent PLUS loan that's been consolidated into a Direct Consolidation Loan can qualify for ICR (a different plan).

Re-certification

Like all IDR plans, IBR requires annual re-certification of income and family size. Missing it puts you back on the Standard Plan and capitalizes any unpaid interest into your principal — a costly mistake.

When IBR is the right choice

IBR is often the only option for older borrowers, borrowers with FFEL loans, or borrowers who don't qualify for PAYE or SAVE. For everyone else, the newer plans usually produce a lower monthly payment.