IBR Plan (Income-Based Repayment)

Income-Based Repayment (IBR) was one of the first income-driven plans and remains a solid option for borrowers with high debt relative to income.

Payment Calculation:

• 10% of discretionary income (for new borrowers after July 1, 2014)
• 15% of discretionary income (for borrowers before July 1, 2014)
• Discretionary income = income above 150% of poverty line
• Never more than the Standard 10-year payment amount

Example:

• $45,000 income, $60,000 debt
• Poverty line for single person: ~$15,000
• Discretionary income: $45,000 - $22,500 = $22,500
• Monthly payment: 10% of $22,500 / 12 = $186/month

When to Choose IBR:

• Your debt significantly exceeds your annual income
• You don't qualify for the SAVE plan
• You borrowed before PAYE was available
• You work in public service (counts toward PSLF)

Important Notes:

• Forgiveness after 20 years (new borrowers) or 25 years (old borrowers)
• Married borrowers must include spouse's income if filing jointly
• Unpaid interest can capitalize when leaving the plan