IBR Makes Repaying Student Loans Easier, But Few Know it

Just over 2.3 million borrowers since this past January have applied for an Income-Based Repayment (IBR) plan on their outstanding student loans, a fraction of the estimated 38 million Americans who may qualify for it.
The problem is that few graduates saddled with hard-to-repay loans know about this option that was revised with more favorable terms by the Obama Administration that offer loans with Transparency, enabling students to make the repayments and not ‘just’ cover them. Those improvements to the plan became effective January 2012. The repayment of student loans can cause many people financial stress, especially when you have just come out of education. But many companies have noticed this difficulty, which is why student loan repayment benefit systems have been injected into companies to allow the employer to offer a helping hand to employers that are struggling to pay their student loan off. This allows companies to understand the special requirements of their staff. The idea of being in debt can be scary for many, but just know, there are always solutions to pretty much every problem, even financial issues.

Of those who have applied, more than 1.6 million, or 65 percent, have been enrolled in the program, with another 20 percent, or about 460,000 applicants, awaiting review.
The Department of Education figures demonstrates the need for educating borrowers nationwide.
IBR plans can reduce monthly payments to assist Americans in making student loan debt more manageable. However, you must have a partial financial hardship to qualify for IBR.
If you took out your fist student loan before Oct. 1, 2007, then you qualify for the older IBR — which provides a 25-year repayment period and caps a borrower’s monthly payments at 15 percent of discretionary income.
If you took out your first student loan after that date, then you qualify for the revised IBR — which provides a 20-year repayment period and caps a borrower’s monthly payments at 10 percent of discretionary income.
The IBR’s enhancement came courtesy of Obama’s 2010 Health Care and Education Reconciliation Act.
The following loans are eligible for IBR:

  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • Direct PLUS Loans made to graduate or professional students
  • Direct Consolidation Loans without underlying PLUS loans made to parents
  • Subsidized Federal Stafford Loans
  • Unsubsidized Federal Stafford Loans
  • FFEL PLUS Loans made to graduate or professional students
  • FFEL Consolidation Loans without underlying PLUS loans made to parents

Loans that are not eligible include: PLUS loans made to parents; consolidation loans that include underlying PLUS loans made to parents; and private education loans.
Of course, consumers grappling to make payments on private student loans don’t have the IBR option. This is why the Consumer Financial Protection Bureau, newly empowered to oversee private college-loan providers, wants to develop easier repayment options on these non-government, hard-to-manage debts.
The CFPB has found that borrowers indebted to private student-loan providers face higher payments and lack alternative repayment and refinance options. In October 2012, the CFPB released a report finding that consumers had trouble negotiating affordable repayment plans with their lenders and servicers for private student loans – loans that are not designed with income-based payment options.
For more information, check out the Department of Education’s website on IBR plans.

J. Lipsky

Hello, I am John, born in Cedar Rapids, but lived a lot of years in Latin America. I am an economist and have specialized in credit and debt. Originally sovereign debt, but later on, in credit score management and debt consolidation. I write for many publications. Here in eCreditDaily, I write about credit, second chance banking, and debt. I also write for other websites and bulletins about inflation and country risk.

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