How the Income-Based Repayment (IBR) plan works
Income-Based Repayment (IBR) is a federal repayment plan designed to keep student loan debt manageable for borrowers experiencing financial hardship. Your monthly payment is capped at a percentage of your discretionary income, defined as the difference between your Adjusted Gross Income (AGI) and 150% of the federal poverty guideline for your family size.
For 'new borrowers' who took out their first federal student loan on or after July 1, 2014, payments are capped at 10% of discretionary income, with remaining debt forgiven after 20 years (240 monthly payments).
For borrowers with older federal loans prior to July 1, 2014, payments are capped at 15% of discretionary income, with forgiveness occurring after 25 years (300 monthly payments).
Worked example
Suppose you have an AGI of $48,000 as a single borrower with $50,000 in federal loans under IBR (new borrower rules).
With a family size of 1, the 2024 poverty line is $15,060, making 150% of the guideline equal to $22,590. Your discretionary income is $48,000 - $22,590 = $25,410.
Your annual IBR payment is 10% of $25,410, which equals $2,541.00 per year, or $211.75 per month (compared to over $568/month on the standard 10-year plan). If your income remains steady, any balance remaining after 20 years is officially forgiven.
The IBR payment cap guarantee
A distinct feature of the IBR plan is that your monthly payment can never exceed what you would have paid under the standard 10-year repayment plan when you initially entered the plan.
Even if your salary rises dramatically later in your career, your monthly payment is capped at the permanent standard payment benchmark, protecting higher earners from ballooning payments.
Inputs for the IBR forgiveness calculator
Adjusted Gross Income (AGI)
Your total pre-tax annual income from your Form 1040 federal tax return.
Family size
Household size used by the Department of Education to calculate your 150% poverty threshold.
Federal student loan balance
Your total outstanding federal loan balance.
Average interest rate
The weighted average interest rate across your federal loans.
Repayment plan
Choose IBR for new borrowers (10%, 20 years) or older borrowers (15%, 25 years).
PSLF eligibility
Select yes if working for an eligible 501(c)(3) or government agency for 10-year forgiveness.
CALCULATOR QUESTIONS
IBR loan forgiveness calculator questions
Who qualifies for Income-Based Repayment?
To qualify for IBR, you must demonstrate a partial financial hardship, meaning your calculated IBR payment is less than what you would pay under the standard 10-year plan.
What is the difference between IBR for new vs old borrowers?
Borrowers who took their first loan on or after July 1, 2014 pay 10% of discretionary income and receive forgiveness after 20 years. Older borrowers pay 15% and receive forgiveness after 25 years.
Can married borrowers file separately under IBR?
Yes. If married borrowers file federal taxes separately (Married Filing Separately), only the borrower's individual income and federal student loan debt are considered in calculating the IBR payment.
Do I have to recertify my income every year?
Yes. You must submit your updated tax return or proof of income annually through StudentAid.gov to maintain your IBR payment amount.
Is IBR forgiveness taxable?
Under the American Rescue Plan Act, student loan forgiveness is federally tax-free through December 31, 2025. After 2025, non-PSLF federal loan forgiveness may be subject to federal income tax unless Congress extends the provision.