Income-Based Repayment: How It Works and Whom It’s Best For
The Education Department has temporarily suspended student loan forgiveness under the Income-Based Repayment plan.
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Student loan borrowers often use the term “income-based repayment” to describe income-driven repayment plans that can lower monthly bills based on income and family size. But Income-Based Repayment (IBR) is actually one of four such plans known collectively as income-driven repayment (IDR) plans. IBR is potentially the most complicated of the bunch.
Income-Based Repayment is unique because its features change depending on whether you took out your loans before July 1, 2014, or from that date on. Borrowing before that date will qualify you for Old IBR, which caps payments at 15% of your discretionary income and forgives your loans after 25 years of payments. New IBR improves on those numbers, shrinking them to 10% and 20 years, respectively.
Old IBR at a glance:
• Repayment length: 25 years.
• Payment amounts: 15% of your discretionary income.
• Other qualifications: Must have federal student loans.
• Best for: Borrowers with FFELP loans.
New IBR at a glance:
• Repayment length: 20 years.
• Payment amounts: 10% of your discretionary income.
• Other qualifications: Must have federal direct loans.
• Best for: Borrowers who don't qualify for Pay As You Earn (PAYE).
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Student loan forgiveness under IBR program suspended
Student loan forgiveness for borrowers on the IBR plan who finish their 20- or 25- year repayment term is suspended as of July 2025, according to a recent update to an FAQ section on the Education Department website.
"Currently, IBR forgiveness is paused while our systems are updated to accurately count months not affected by the court's injunction. IBR forgiveness will resume once those updates are completed," the department website says.
This move is ostensibly because payments under the three other income-driven repayment plans (ICR, PAYE and SAVE) are paused due to a court order in the SAVE lawsuit. However, there is no court order blocking forgiveness under the IBR plan.
There's no clear guidance for borrowers who finish their 20- or 25-year IBR repayment term during this forgiveness suspension. You are required to make monthly payments until your forgiveness is processed, even after finishing your repayment term. Historically, servicers have sent refunds to borrowers who overpay past the forgiveness finish line.
Alternatively, you can try calling your servicer and ask them to place you in a forbearance until your IBR forgiveness is processed. This will pause payments, though interest may accrue on your debt.
Is IBR right for you?
If you qualify for New IBR — meaning you took out loans on or after July 1, 2014 — this plan is usually the best income-driven option for you in the following instances:
You don’t also qualify for PAYE.
You don’t expect your income to increase much over time.
You have grad school debt.
You’re married, and you and your spouse both have incomes.
IBR vs. other income-driven plans
All income-driven plans share some similarities: Each caps payments at between 10% and 20% of your discretionary income and forgives your remaining loan balance after 20 or 25 years of payments.
Use Federal Student Aid's Loan Simulator to see how much you might pay under different plans.
If IBR doesn't sound right for you, consider one of the other two available income-driven repayment plans: PAYE or Income-Contingent Repayment. (SAVE is closed for new enrollment.)
In most cases, the least confusing way to select an income-driven plan is to let your servicer place you on the plan with the lowest monthly payment you qualify for. The plan that most federal direct loan borrowers qualify for is likely SAVE.
But specifically choosing IBR may be right for you in the following instances:
How to apply for Income-Based Repayment
You must enroll in Income-Based Repayment. You can do this by mailing a completed income-driven repayment request to your student loan servicer, but it’s easier to complete the process online. You can change your student loan repayment plan at any time.
Visit studentaid.gov. Log in with your Federal Student Aid ID, or create an FSA ID if you don’t have one.
Select income-driven repayment plan request. Preview the form so you know what documents to have ready, like your tax return.
Choose your plan. If you qualify for more than one income-driven repayment plan, you can be automatically placed in the plan with the lowest payment or specifically choose IBR if it makes the most sense for you.
Complete the application. Enter the required details about your income and family. Remember to include your spouse’s information, if applicable, as it will affect your payments under IBR.
Other ways to pay less
If income-driven repayment isn't right for you, the federal government offers extended repayment and graduated repayment plans, which lower your payments but aren’t based on your income. You may pay more interest under these plans, though, and neither offers loan forgiveness.
You also may be able to pay less by refinancing your student loans. Refinancing federal student loans can be risky, as you’ll lose access to income-driven repayment and other federal loan programs and protections. But if you’re comfortable giving up those options and have strong credit as well as a steady income, refinancing may save you money.