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 Home > FFELP Resources > Default Aversion > Understanding Repayment > Income Based Repayment

The Federal Government wants you to be able to pay back your student loans. Income Based Repayment (IBR) caps your required monthly payment at an amount that is intended to be affordable based on your income, family size, state of residence and student loan indebtedness.

IBR is a repayment plan for the Stafford, Grad PLUS or Consolidation loans made under the FFEL or Direct Loan program. Loans excluded include those currently in default, parent PLUS Loans, or consolidation loans that repaid a parent PLUS Loan. The loans can be new or old, and for any type of education (undergraduate, graduate, professional and/or job training).

You may enter IBR if your federal student loan debt is high relative to your income and family size and if you demonstrate partial financial hardship (PFH). You can use the Department of Education’s calculator found at to estimate your benefit from the IBR plan. It looks at your income, family size and state of residence to calculate your IBR monthly payment amount. If that amount is lower than the monthly payment under a 10-year standard repayment plan, then you are eligible to repay your loans under IBR.

After the initial determination of your eligibility for IBR, your payment may be adjusted each year based on your income and family size, but your required payment will never be more than the permanent-standard 10-year payment amount, unless you choose to exit the IBR program.

Benefits of IBR

Under IBR, your monthly payment amount will be less than the amount you would be required to pay under a 10-year standard repayment plan, and may be less than other repayment plans. Although lower monthly payments may be of great benefit to a borrower, these lower payments may result in a longer repayment period and additional interest.

If your monthly IBR payment does not cover the monthly interest that accrues on the loans, the government will pay your unpaid interest on Subsidized Stafford Loans (either Direct Loan or FFEL) for up to three consecutive years from when you first enter IBR repayment. After three years, and for all the other types of loans, interest that accrues will be capitalized (added to the loan principal on which future interest is calculated) when you are borrower no longer eligible for an IBR repayment amount.)

If you repay under the IBR plan for 25 years and meet certain other requirements, any remaining balance will be cancelled.

If you work in public service and have reduced loan payments through IBR, your remaining balance after ten years in a public service job could be cancelled if you made loan payments for each month of those ten years. The Public Service Loan Forgiveness Program is not an option that can be offered by OSLA. It is available only if you have Direct Loans and you make 120 monthly payments under the Direct Loan Program. If you have FFEL loans, you may be eligible to consolidate them into the Direct Loan Program to take advantage of the Public Service Loan Forgiveness Program. However, only the payments made while in the Direct Loan Program will count toward the required 120 monthly payments. For more information about this program, please visit the Department’s Public Service Loan Forgiveness FAQ page.

Disadvantages of IBR

The faster you repay your loans, the less interest you pay. Because a reduced payment in IBR generally extends your repayment period, you may pay more total interest over the life of the loan. Also, other conditions may apply and the unpaid balance plus unpaid, accrued interest may be taxable.

To set your payment amount each year, your lender needs updated information about your income and family size. If you do not provide the documentation and a current tax return, your payment reverts to the permanent-standard 10-year repayment amount.

Applying for IBR
To apply for IBR, complete and return the:
  1. IBR Request Letter
  2. IBR Application
  3. En Español
  4. IBR Insert for Application Letter
  5. Most recent tax return (Example: Current year is 2010 and tax return must be for 2009.)
All completed and signed forms can be mailed or faxed  to OSLA.

If you prefer for a packet to be mailed to you, contact Customer Service.