 TITLE: What Is Income-Based Repayment? CONTENT: How Does Income-Based Repayment Work?\n-------------------------------------\nAn income-based repayment plan, called IBR for short, reduces your monthly payment to 10% or 15% of your discretionary income and extends your repayment term to 20 or 25 years.\nThe lower payment amount and shorter term are reserved for new borrowers who took out their first loan on or after July 1, 2014. For borrowers who received loans before that, the 15% rate and 25-year term apply.\nThe U.S. Department of Education calculates your discretionary income by taking the difference between your annual income and 150% of the poverty guideline for your state of residence and family size. You'll need to recertify these details every year, which means your payment may increase as your income does, but it will never exceed the monthly payment you'd otherwise pay based on the 10-year standard repayment plan.\nIf you still have a balance left over after your repayment term under the plan ends, it'll be forgiven. However, the forgiven debt will be considered taxable income.\nIBR isn't the only student loan repayment plan the federal government offers, nor is it necessarily the best plan for your financial situation. It may be beneficial, however if you don't qualify for the Pay As You Earn (PAYE) plan, which offers a 10% payment and 20-year term.\nIt can also be worth considering if you don't expect your income to increase much over time, as that could make it more likely that you'll receive forgiveness for some of your balance after 20 or 25 years. END