If you have a student loan debt balance that is close to or exceeds your annual income, this is for you. Income-Based Repayment (IBR) is a new way to lower your federal student loan payments starting July 1, 2009. It caps monthly payments and forgives remaining debt and interest after 25 years. And if you’re a teacher or work in government, nonprofit, or other public service jobs, you could have your federal loans forgiven after just 10 years.
Here’s an animated video about the topic from IBRinfo.org:
Under IBR, most borrowers will have a monthly payment that is less than 10% of gross income. This includes single borrowers with less than $50,000 in income and married borrowers with two children who have less than $100,000 in income. This is only available to federal student loan programs, so those with private student loans are not eligible.
An example from this USA Today article:
Suppose you have $30,000 in student loans, and you estimate that your 2009 income will be $25,000. Assuming your loans have a fixed interest rate of 6.8%, your monthly payment under the income-based repayment program would be $110, vs. $345 under a standard 10-year repayment plan. […] If your income rises in the future, your payments will, too. […] However, any amount you owe after 25 years of qualifying payments will be forgiven.
To see if you qualify for a lower payment, enter your info into this IBR qualification calculator. To enroll, you’ll have to contact your lender directly about income-based repayment once it become available July 1st, 2009.