Frequently Asked Questions
>>>See the U.S. Department of Education's Q&A about IBR.<<<
Who can use Income-Based Repayment (IBR)?
How does IBR make payments more affordable?
How do I find out whether I qualify for IBR?
The calculator indicates I’m likely eligible for IBR. How do I sign up?
I have no idea who is servicing my loan now. Can you help?
Can I use IBR to pay my old federal loans?
Can I use IBR to pay my private, non-federal loans?
Can I use IBR if I am in default?
How does IBR treat interest? Does it still accrue?
What if I choose the IBR plan and later decide I want to choose a different plan?
Are there any down-sides to IBR? What happens if my income increases? Can I get kicked out of IBR?
Will IBR hurt my credit rating?
How do I change from my current repayment plan to IBR or ICR?
If I sign up for IBR, can I occasionally send in extra money to pay down the principal of my loan?
My loan has been sold or reassigned. Is it still a federal loan? Can I still participate in IBR?
I’m not eligible for IBR or ICR, but am having difficulty paying my federal student loans. Is there help for me?
Can I speak with someone at IBRinfo.org who can help me with my personal student loan situation?
Loan Consolidation Questions
If I have multiple unconsolidated loans, will I have to consolidate them to qualify for IBR?
If I have multiple unconsolidated loans, will I have to consolidate them to qualify for PSLF?
How do I consolidate my loans?
Can I reconsolidate my loans if I’ve consolidated them in the past?
My spouse and I jointly consolidated our debt when that was an option. Are we eligible for IBR?
Loan Forgiveness Questions
How does loan forgiveness work with IBR?
How does Public Service Loan Forgiveness (PSLF) work?
Where can I find more information about PSLF job eligibility?
Can I qualify for Public Service Loan Forgiveness if I work overseas?
I think I qualify for PSLF, but how can I be sure? Is there a way to register for the program?
Do income-sensitive, graduated, or extended loan payments count towards PSLF?
I'm doing my medical residency at a public/nonprofit hospital. Do those years count toward PSLF?
GENERAL IBR QUESTIONS
Who can use Income-Based Repayment (IBR)?
IBR is available to federal student loan borrowers in both the Direct and Guaranteed (or FFEL) loan programs who have high debt relative to income. IBR is available for most types of federal loans made to students, but not those made to parents (click here for more information about qualifying loans). Use our calculator to see if your debt and income levels make you eligible for lower payments through IBR.
How does IBR make payments more affordable?
IBR uses a sliding scale to determine how much you can afford to pay on your federal loans. If you earn below 150 percent of the poverty level for your family size, your payment will be $0. If you earn more, your loan payment will be capped at 15 percent of whatever you earn above that amount. Except for the highest earners eligible, that usually works out to less than 10 percent of your adjusted gross income (AGI).
How do I find out whether I qualify for IBR?
We recommend that you use our IBR calculator to see if you likely qualify for the program.
The IBR calculator indicates that I’m likely eligible for Income-Based Repayment of my student loans. How do I sign up?
You must contact your loan provider directly to sign up. If your lender is the U.S. Department of Education, start here. If you do not know who your lender is, search the National Student Loan Data System database.
I have no idea who is servicing my loan now. Can you help?
If you have a federal loan from any lender, you should be able to find it in the National Student Loan Data System database.
Can I use Income-Based Repayment to pay my old federal loans?
Income-Based Repayment is available for any federal loans in the Direct Loan or Federal Family Education Loans (FFEL) programs, regardless of when the loan was taken out.
Can I use Income-Based Repayment to pay my private, non-federal loans?
No, IBR is not available for private, non-federal, or alternative loans.
Can I use IBR if I am in default?
Since IBR is a repayment plan, you must be in repayment (not in default) in order to use it. If you are able to get out of default through rehabilitating or consolidating your loans, you will once again be eligible for the more flexible pre-default repayment options as well as deferments. For more information on repayment to get out of default visit Student Loan Borrower Assistance's website.
How does IBR treat interest? Does it still accrue?
If your reduced payment under IBR does not cover the interest on your loans, the government will pay that interest on your Subsidized Stafford Loans during your first three years in IBR. After three years, and for all other loan types, the interest will accrue but not compound. That means it will be added to your principal, but interest will continue to accrue only on the original principal amount. Anything you still owe after 25 years of qualifying payments will be forgiven.
What if I choose the IBR plan and later decide I want to choose a different plan?
You can change repayment plans at any time. However, any unpaid interest that has accumulated in IBR would be capitalized when you switched out of the program, which means it will be added to your total loan amount. Also, current regulations require that when you leave IBR, you must go into a 10-year standard payment plan (or longer for a consolidated loan), minus the number of years you were in IBR. Since this would not be an affordable payment schedule for many borrowers, you should be able to switch out of that plan to any other repayment plan you are eligible for. We are waiting for confirmation on this, and will update this question accordingly as soon as possible.
What’s the difference between Income-Based Repayment (IBR) and Income-Contingent Repayment (ICR)? Is one better than the other?
- ICR has been around since 1994. IBR starts in 2009.
- ICR only covers Direct Loans. IBR covers both Direct and FFEL loans.
- ICR and IBR use slightly different formulas to determine the amount of your monthly payment. For more information on the specifics of these formulas, see FinAid.org.
- Generally speaking, IBR will yield lower monthly payments than ICR, although there are a few scenarios where ICR will yield lower payments. To find out which one works best for you, we recommend using both the IBR calculator and the ICR calculator.
Are there any down-sides to IBR?
Like any repayment plan that allows you to pay less per month, you may end up paying more in the long run with IBR due to accumulated unpaid interest. However, if you meet the loan forgiveness provisions of IBR or Public Service Loan Forgiveness your remaining loan balance, including any accumulated interest, could be wiped away.
- What happens if my income increases and I no longer have a “partial financial hardship”?
A partial financial hardship is when the 10-year standard monthly payment on what you owed when you first entered repayment is more than 15% of discretionary income. If your income increases to the point where that is no longer the case, any unpaid interest that has accumulated would be capitalized, which means it will be added to your total loan amount. However, you can still stay in IBR, and never have to pay more per month than the 10-year standard monthly payment on the balance you owed when you first entered repayment on the loan. - Can I get “kicked out” of the IBR program if my income increases?
Your IBR payment will increase as your income increases, but you'll never be "kicked out" of IBR unless you default on your loan. In fact, you can stay in IBR no matter how high your income rises, and you'll never have to pay more than the 10-year standard monthly payment on the balance you owed when you first entered repayment on the loan. Here's a calculator to find out what that 10-year standard payment would be.
Will IBR hurt my credit rating?
The only information lenders provide to FICO, the company that determines your credit score, is the status of your payments. That is, if you are paying on time, are past due, or are in default. The Department of Education will work with the consumer reporting organizations to ensure that any amounts of debt forgiven under IBR or PSLF are not viewed as negative reporting codes.
How do I change from my current repayment plan to IBR or ICR?
You can change plans by contacting your lender directly. For borrowers with Direct Loans, your lender is the U.S. Department of Education.
My lender is asking for last year's AGI (Adjusted Gross Income), but my income was substantially higher then than it is now. Is there anything I can do? How often to they look at my current income? What if I did not file a tax return?
If your income changes substantially at any point, if your tax return does not reflect your current financial situation, or if you did not file a tax return, let your lender know and ask to complete an Alternative Documentation of Income form. This form lets you give other evidence of your income besides your most recent AGI. Your lender will check your income annually, either with the IRS (with your permission), or by asking you to resubmit the Alternatuve Documentation of Income form.
If I sign up for IBR, can I occasionally send in extra money to pay down the principal of my loan?
Yes, but we recommend you tell your lender in writing that you want the money applied to the principal, and follow up to make sure the payment was properly applied.
My loan has been sold or reassigned. Is it still a federal loan? Can I still participate in IBR?
Yes. Even if the government (or other lender) sells or reassigns your loan, you can still participate in IBR as long as you are in repayment (not in default) and meet all of the other eligibility criteria.
I’m not eligible for IBR or ICR, but am having difficulty paying my federal student loans. Is there help for me?
If you are struggling with your loan payments, you’ll find extensive information for consumers at www.studentloanborrowerassistance.org.
The calculator indicates that I am not eligible for IBR when I include my spouse’s income, but might be if I file my taxes separately from my spouse. Is this true, and if so, is there any disadvantage to filing separately?
It is true that you and your spouse are allowed to file your taxes separately in order to take advantage of IBR. However, you may lose certain tax benefits when you file separately, such as the Earned Income Tax Credit, or the ability to deduct the interest you pay on your student loans. Unfortunately there’s no easy way to compare the benefits gained by lower payments through IBR and those lost by filing separately.
The U.S. Department of Education has agreed to revisit this rule and factor in both spouses' debts when calculating one applicant's IBR payments, but that change would not go into effect until as late as July 2010. Please sign up for our mailing list so we can keep you updated on these and other changes. More information is available here.
Can I speak with someone at IBRinfo.org who can help me with my personal student loan situation?
IBRinfo.org is part of the Project on Student Debt at the nonprofit research and policy organization, the Institute for College Access & Success. We can not provide legal or financial advice to borrowers, and are not involved with the administration of these programs. If you have a question about IBR or Public Service Loan Forgiveness not addressed in this FAQ, you may submit questions to the Federal Student Loan Ombudsman at the U.S. Department of Education. More information for borrowers struggling with student loan repayment is available at www.studentloanborrowerassistance.org.
LOAN CONSOLIDATION QUESTIONS
If I have multiple unconsolidated loans, will I have to consolidate them to qualify for IBR?
No, but you may want to anyway. Your lender will take all of your federal loans into consideration in determining your IBR eligibility and payment. If you have multiple lenders, your total IBR payment will be apportioned among the lenders. This will require communication and cooperation from multiple lenders, more paperwork, and an increased risk of errors or problems, so consolidating your loans might be a way to streamline the process. Here is some more information on the pros and cons of student loan consolidation.
If I have multiple unconsolidated loans, will I have to consolidate them to qualify for PSLF?
Not if all of your loans are in the William D. Ford Direct Loan program, although consolidating may make it easier for you to keep track of your forgiveness-eligible payments, and to fill out the annual IBR or ICR income verification paperwork when participating in either of those repayment plans. If any of your loans are in the FFEL guaranteed loan program, then you must conoslidate these loans into the Direct Loan program for them to be eligible for PSLF - you can consolidate FFEL loans for the purpose of attaining PSLF even if you have consolidated previously. Please be aware than any time you consolidate your federal student loans, it creates a "new" loan - this means that any PSLF-eligible payments you made on your Direct Loan prior to consolidating would no longer be counted toward PSLF on this "new" loan.
How do I consolidate my loans?
If you have multiple federal loans, you can consolidate them into one loan. The fixed interest rate of the new loan will be an average of the rates of the loans you consolidate. Many Federal Family Education Loan (FFEL) lenders have stopped making federal consolidation loans, so many borrowers are consolidating through the U.S. Department of Education’s Direct Loan Program. This will also make you eligible for Public Service Loan Forgiveness if you work in a public service job. Click here to learn more about and/or apply for Direct Loan consolidation.
You can NOT consolidate private, non-federal, loans into the Direct Loan program. Private loans are not eligible for IBR or Public Service Loan Forgiveness.
Click here more information on consolidation in general.
Can I reconsolidate my loans if I’ve consolidated them in the past?
In general, once you consolidate your loans, you can not reconsolidate. However, there are a couple exceptions. If you have Federal Family Education Loans (FFEL) loans—where your lender is a private entity like Sallie Mae or Citibank—you can consolidate into the Direct Loan program to qualify for Public Service Loan Forgiveness, even if you have already consolidated your loans in the FFEL program.
Also, if you are consolidating to obtain either Income-Contingent Repayment (ICR) or Income-Based Repayment because your loan has been submitted to a guaranty agency for default aversion, you can reconsolidate, even if you have previously consolidated. Click here for more information on loan consolidation.
My spouse and I jointly consolidated our debt when that was an option. Are we eligible for IBR?
Yes. According to the Department of Education's Income-Based Repayment application, both you and your spouse must sign the IBR application. In order to qualify, "both you and your spouse must have partial financial hardship to repay an eligible joint consolidation loan under IBR." Since each borrower is obligated to the full joint consolidation loan, the full loan amount would be used in the calculation for each borrower in determining whether they have a partial financial hardship. The IBR calculation for each married borrower with joint consolidation loans who file their taxes jointly would be based on the total loan amount and the combined income.
Joint Direct Consolidation Borrowers are also eligible to apply for Public Service Loan Forgiveness if they meet all the other eligibility criteria. If only one borrower qualifies for PSLF, only a prorated portion of the remaining balance of the debt (based on the same proportion of that borrower's debts to the original consolidation loan) would be forgiven. If both borrowers meet the requirements for PSLF, the entire balance would be forgiven. Unfortunately, FFEL joint consolidation borrowers are currently unable to "reconstitute" the joint loan in the Direct Loan program to take advantage of PSLF.
IBRinfo had previously understood joint consolidation loans to be ineligible for both IBR and PSLF, and we are pleased to share this update for borrowers with joint consolidation loans.
LOAN FORGIVENESS QUESTIONS
How does loan forgiveness work with IBR?
You can receive loan forgiveness after 25 years of qualifying payments, if a balance remains. The Department of Education has indicated that the following types of payments will count towards IBR's 25-year forgiveness period, as long as you are in IBR at some point during those 25 years:
- Payments made in the Income Contingent Repayment plan (ICR) before July 1, 2009.
- All payments made on or after July 1, 2009 in the IBR, ICR, and Standard (10-year) Repayment plans.
- Periods when the borrower has a calculated payment of zero in IBR or ICR (this occurs when your income is at or below 150% of the poverty level for your family size).
- Periods on or after July 1, 2009, when the borrower has been granted an economic hardship deferment.
Find out more about how to qualify for IBR.
How does Public Service Loan Forgiveness (PSLF) work?
To be eligible for Public Service Loan Forgiveness you must make 120 of the right kind of payments, with the right kind of loan, while working in the right kind of job. The 120 payments do not have to be consecutive. If you’re doing all of these things, the first date that a payment can count towards PSLF is October 2007, and the first date that one can be eligible for forgiveness is October 2017.
More details on the eligibility criteria for PSLF:
1) The right kind of job. In general, you should qualify if you are a full-time employee of a local, tribal, state, or federal government, or a 501(c)(3) nonprofit. Full-time is defined as an annual average of at least 30 hours a week, or the number of hours your employer considers full-time, whichever is GREATER (unless you work for multiple public service employers, in which case only the “30 hours a week” definition applies). For teachers and other public service employees whose typical employment period is for 8 months or more, the full-time guideline is working an average of at least 30 hours per week during that period. For more details on other jobs that may qualify, click here.
2) The right kind of loan.These are federal Direct Loans (William D. Ford Direct Loan Program). If you have federal loans from a private lender through the FFEL Program, you can consolidate into a Direct Loan to take advantage of PSLF, even if you have consolidated previously.
3) The right kind of payment. These are payments made under the Income-Based Repayment (IBR), Income-Contingent Repayment (ICR), or Standard 10-Year Repayment plans. PSLF is intended for people who have high debt relative to income and qualify for ICR or IBR for at least part of their career in public service. Therefore, if you make all 120 payments under the Standard 10-Year plan, you will pay off your entire debt in ten years and have nothing left to forgive.
Where can I find more information about job eligibility?
According to the Department of Education’s final regulations for PSLF, your job is eligible if you:
- are employed by any nonprofit, tax-exempt 501(c)(3) organization (not sure if yours counts as a 501(c)(3)? Check with the IRS);
- are employed by the federal government, a state government, local government, or tribal government (this includes employment by the military, public schools and colleges, public health centers, etc.); or
- serve in a full-time AmeriCorps or Peace Corps position.
If you don't meet these criteria, the Department of Education's regulations create a two-part test of other circumstances under which you may still be eligible:
(1) your employer is not "a business organized for profit, a labor union, a partisan political organization, or an organization engaged in religious activities, unless the qualifying activities are unrelated to religious instruction, worship services, or any form of proselytizing;" AND,
(2) your employer provides any of the following public services: emergency management; military service; public safety; law enforcement; public interest law services; early childhood education; public service for individuals with disabilities and the elderly; public health; public education; public library services; and school library or other school-based services.
Can I qualify for Public Service Loan Forgiveness if I work overseas?
As long as you are working for a U.S. nonprofit organization or a U.S. government employer you should meet the eligibility criteria for employment. PeaceCorps volunteer work is explicitly eligible for Public Service Loan Forgiveness, but unpaid volunteering is not.
I think I qualify for Public Service Loan Forgiveness, but how can I be sure? Is there a way to register for the program?
Unfortunately, the Department of Education does not currently have a formal process for "registering" for public service loan forgiveness, or for confirming eligible employment. However, we are putting substantial pressure on the Department to put an eligibility confirmation process in place swiftly so that borrowers can make good financial decisions regarding their student loans. In the meantime, save records that identify your employer and the dates and hours of your employment.
Do income-sensitive, graduated, or extended loan payments count towards PSLF?
No. Only Income-Contingent, Income-Based, and Standard 10-Year payments count. PSLF is intended for borrowers with high debt-to-income ratios for at least part of their careers in public service. Graduated and extended repayments are available to all borrowers regardless of income, so it would be easy for higher-income borrowers to game the system if these payments were eligible.
I'm doing my medical residency at a public/nonprofit hospital. Do those years count toward PSLF?
Yes, as long as you are working full-time at a public or 501(c)(3) nonprofit hospital and meet other requirements for Public Service Loan Forgiveness.
I work at a nonprofit and am still paying off my loans for my undergraduate degree. If I take out more loans to go back to school for a graduate degree while still working, will those loans also qualify for Public Service Loan Forgiveness?
Your new loans could also qualify for Public Service Loan Forgiveness, but keep in mind that 1) the loans must be in the Direct Loan program and 2) you cannot start the PSLF clock on your second set of loans until you have entered repayment. Also be aware that if you choose to consolidate your old loans with your new loans, you would then have one big "new" loan, causing the PSLF clock to start over and any PSLF-eligible payments you made on your undergraduate loans before consolidating would no longer count toward the 120 required PSLF payments. You are not required to consolidate your loans to access PSLF for each individual loan as long as the loans are in the Direct Loan program.
So, with IBR, I can receive loan forgiveness after making 10 years of qualifying payments if I work in an eligible public service job, and after 25 years otherwise. Is there any middle ground for someone who works in public service for a period of time, and then moves to the private sector?
Someone who works for less than 10 years in public service would not receive a pro-rated amount of forgiveness. For example, if you worked for 8 years in public service and then left to work in the private sector, you would have to make an additional 17 years of payments in IBR (or ICR) to qualify for forgiveness. You can, however, come back to public service and restart the clock where you left off. Continuing with the example above, if after working for several years in the private sector you decided to switch to an eligible public service job, your remaining debt would be forgiven after just 2 more years of eligible repayments.
It says that the “Standard 10-Year Repayment Plan” is one of the eligible repayment plans for receiving Public Service Loan Forgiveness. But if I make 120 payments (10 years) in that plan, won’t I have paid off all of my debt?
Yes, if you make Standard 10-Year repayments for 10 years, you won’t have any debt left to forgive. PSLF is intended for people who have high debt-to-income ratios and qualify for ICR or IBR for at least part of their career in public service. However, if you pay under the IBR or ICR repayment plans for even a portion of your PSLF-eligible 120 payments, you would have some debt to forgive after 120 payments, even if you mostly made Standard 10-Year payments during that time.
I want to make Standard 10-Year payments until IBR becomes available in July, so that my payments count towards Public Service Loan Forgiveness. But for my amount of debt, I was told that the “standard plan” is longer than 10 years. Would these lower “standard” payments count towards PSLF?
Unfortunately, the word “standard” can be confusing, as it is used in several different contexts regarding student loan repayment plans. ONLY the Standard 10-Year Repayment Plan is eligible for PSLF, regardless of what a loan representative may say the “standard” repayment plan is for your debt level. There’s no minimum time frame for your loan repayment plan, only a maximum. For example, if your consolidation loan balance is $60,000, the MAXIMUM timeframe that you can take to repay this amount is 30 years, but you can legally choose a payment plan that is any number of years less than or equal to 30 – including the Standard 10-Year plan. You may have to explain this to the loan representatives you speak with, as they are probably not used to borrowers trying to shorten the time frame within which they repay their loans!
Will forgiven loan amounts be taxed as income?
The U.S. Department of the Treasury determined that debt forgiven through PSLF is not considered taxable income under current law. That means that when you qualify for PSLF, you won't get slapped with a huge tax bill as if you'd won the lottery.
Unfortunately, the same good news doesn't extend to debt forgiven through IBR. In response, Congressman Sandy Levin (D-MI) is leading a bipartisan effort to ensure that borrowers who qualify for loan forgiveness through IBR (and Income Contingent Repayment) get the same treatment. Responsible borrowers with modest incomes shouldn't have to pay potentially crippling taxes on forgiven student loans. We are confident that this issue will be resolved before any borrowers qualify for forgiveness through IBR. We'll continue to work on this issue and keep you informed.
Will IBR and Public Service Loan Forgiveness remain available in the future, or could these programs be somehow taken away?
IBR and Public Service Loan Forgiveness were passed into law through the College Cost Reduction and Access Act of 2007, and any major changes to these programs would require new legislation to be passed by Congress and signed by the president. This seems highly unlikely to occur in the foreseeable future, and we recommend that borrowers proceed with confidence.
