An income-related repayment plan can help you manage your federal student loan payments by linking the amount you pay each month to your income and giving you more time to repay your loans.
If you qualify, you will be able to lower your monthly payments on your eligible federal student loans based on a percentage of your income, using a federal formula. Once enrolled, you may also stretch out making payments for as long as 20 to 25 years, and in certain cases may be eligible for loan forgiveness of any remaining balance (some public service professions may qualify after 10 years.)
Income-related repayment can help eligible customers manage their payments on:
- Federal Stafford or Direct Loans (subsidized or unsubsidized)
- Federal Grad PLUS loans
- Most federal consolidation loans
Income-related options are available for those who borrowed in either the FFELP or Direct Loan programs.
Loans that are generally not eligible for income-related repayment include:
- Federal Parent PLUS loans
- Federal consolidation loans that include Parent PLUS loans
- Federal Perkins loans
- Private loans
Income-related repayment can be a valuable option for those with high debt relative to their incomes but also can end up costing more because payments extend over a longer term. The good news is that you can make extra payments to pay off earlier or change to another repayment plan. Consider your repayment options carefully and compare your total anticipated costs to make an informed decision about the payment plan that’s best for you.
How to learn more and apply for an income-related plan
To learn more, the Department of Education website offers additional details and a calculator to assess initial eligibility. To apply, use the Department of Education’s online application. Sallie Mae customers may login to model loan payments and estimate loan costs to help select the best payment plan.
Please note that the IBR application process may take time. In the meantime, if you anticipate difficulty in making any scheduled payments please call us at 888-2-SALLIE (888-272-5543) for assistance.
Be sure you know the details
If you’re considering paying your federal loans under an income-related repayment program, be sure to understand the program details, which can be complex. Your loan servicer can help you understand the implications for you based on your specific loans.
Be aware that:
- Changes in the law and the year your federal loan was issued may affect your payment plan. For example, a new “Pay As You Earn” program is only for recent borrowers.
||Percentage of your discretionary income you can expect to pay
||Maximum length of time you can expect to pay after enrolling in the program
|Loans for new borrowers on or after July 1, 2014
|”Pay as You Earn” Program – for customers who have taken out new federal loans on or after October 1, 2011 and had no federal loans on or before October 1, 2007
- Eligibility for an income-related repayment plan is based on a formula set by the federal government based on the current poverty level that considers household income, state of residence, household size, and either the current balance of eligible federal loans or the balance of eligible federal loans at the start of repayment.
- Each customer must annually update their income information and resulting payment amount based on IRS tax data. Payments may rise with income but won’t rise above a customer’s standard repayment amount determined at the start of the plan.
- If your loans were subsidized (that is, need based) and your payment is lower than the interest that accrues each month, the government will pay the difference for a three-year period. If your loans are unsubsidized, you’ll be expected to pay the interest.
- Customers who qualify for loan forgiveness after the required number of payments – that is, 20 to 25 years -- may need to pay taxes on the amount that is forgiven. It’s a good idea to consult with a tax advisor to plan for this eventuality.
- Customers with Direct Loans employed in public service professions may have the remaining balance of their loan forgiven after 10 years of qualifying payments, after October 1, 2007. Loans discharged under the Public Service Loan Forgiveness program are not taxable.
- Married borrowers typically can include their spouse's eligible federal loans in the formula, depending on tax filing status.
- There are two other income-related programs: Income-Sensitive Repayment (FFELP borrowers only) and Income-Contingent Repayment (Direct borrowers only). Please talk to your servicer to learn if ISR or ICR are better for you.