How to Pay Federal Student Loans with the Income Based Repayment (IBR) Program

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By jpwriter
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If you are being crushed under the weight of student loan debt the Income Based Repayment (IBR) program might be your perfect solution. Beginning July 1, 2009 the Department of Education is starting a new program for the repayment of student loans that bases your payment on your income and family size so that you can make payments on your student loans and still be able to afford to live.

Difficulty: Moderate

Instructions

Things You'll Need:

estimated student loan debt amount
adjusted gross income
internet
telephone

Step 1

Find out if your loan is listed as an eligible loan under the income based repayment program. Federal consolidated loans under the Direct Loan or FFEL are eligible for the IBR program unless you are in default. The loans that are not eligible are private student loans, the parent PLUS loans or a consolidation loan if it was consolidated to repay a parent PLUS loan.
Step 2

Figure out your total amount of student loan debt. If you do not have all of your records you can use the online database (see article under Resources for detailed instructions) to pull up all of the information on your loans, whether they are consolidated, defaulted, or in repayment. The database will tell you the total of all of your federal student loans. If you don't have the exact total for your student loans just estimate them.
Step 3

Use the income based online calculator (http://bit.ly/tskDP) to figure out what your payment would be or if you qualify. The online calculator is one of the easiest tools the Department of Education has come out with to figure out anything about student loan debt. You'll need to have five pieces of information available -- your total adjusted gross income, estimated amount of qualifying student loans, the interest rate (which is provided in the form), state of residence, and family size.
Step 4

Call your loan holder to fill out their official application. For example, Sallie Mae has a PDF application that you can fill out if they hold your student loans. Make sure to call each company that services your student loans because you'll have to fill out an application for each one of them since all of your loans are separate.

Tracking down your student loans first is a really good idea. Loans get bought and sold depending on your loan status so it can get very overwhelming to find all of them if you have several different student loans or if you have been repaying them for a long time, defaulted, or had your loans in deferment or forbearance.
Step 5

Weigh the benefits and disadvantages of using this program to repay your student loans. If you are a low income person or have a family and make less than $30,000 (based on a three person household) then your monthly payment is zero. Instead of 10 years your student loan becomes a 25 year loan. If you have not been able to repay this amount over the 25 years then the loans can be forgiven if you meet the requirements.

Some of the disadvantages to repaying your student loan debt under this program is that you will have to submit documentation that you are still falling under the income guidelines to stay eligible. As well, depending on your total student loan debt you can end up paying more in the long run because of accrued interest when you pay lower payments over a longer time.