A couple of new changes to the Income Based Repayment (IBR) Program make it an even better deal for students with high loans and low salaries. This program was designed to make federal student loan payments reasonable in comparison to a person’s income. As part of the IBR Program loan payments are based on a percentage of income and after 25 years any remaining debt is forgiven.

Eligibility Change

More people will be eligible for the IBR Program, because now eligibility is based on either the balance of the loan when it entered repayment or the current balance, whichever is greater. (Borrowers’ loan balances can increase during periods of deferment or forbearance due to accrued interest.)

Married Borrowers

Married couples who both have federal student loans will no longer have to pay higher payments than unmarried students.  If the married borrowers file joint tax returns, lenders must use the combined loan total and the combined income to calculate the loan repayment amount under IBR.  In the past lenders used combined income, but not the combined amount of the loans, resulting in higher repayments.

Another thing to consider

While the IBR Program can be a welcome relief, especially in difficult times like these, one result of paying lower payments is that you also pay for a longer time.  This  means you will pay more interest on a loan.  The 10-Year Standard Repayment Plan offers a lower total repayment on federal student loans.  It works just like credit cards.  If you may a lower amount for a longer time, the total paid will be larger.  Something to consider if you are thinking about applying to the IBR Program.

IBR Calculator

If you would like to determine if you qualify for the IBR Program and approximately what your loan payments would be, use this calculator provided by the Federal Student Aid website.

Blessings,

Bonnie