1. What is Income-Based Repayment?

Income-Based Repayment (IBR) is a type of payment plan for federal student loans that caps your monthly payment at a percentage of your discretionary income, typically 10-15%. It's designed to make student loan payments more manageable based on your income level.

2. How Does the Calculator Work?

The calculator uses the basic IBR formula:

Where:

• \( Income \) — Annual income in USD
• \( percentage \) — IBR percentage as decimal (e.g., 0.10 for 10%)
• \( PMT \) — Monthly payment in USD (annual payment divided by 12)

Explanation: The equation calculates your annual payment obligation and then divides by 12 to get the monthly amount.

3. Importance of IBR Calculation

Details: Calculating your potential IBR payments helps with financial planning and determining if this repayment option would be beneficial for your situation. It can significantly reduce monthly payments for borrowers with lower incomes relative to their debt.

4. Using the Calculator

Tips: Enter your gross annual income and the IBR percentage (typically 0.10 or 0.15). The calculator will estimate your monthly payment under this plan.

5. Frequently Asked Questions (FAQ)

Q1: What counts as income for IBR?
A: Generally, your Adjusted Gross Income (AGI) from your tax return is used, plus any untaxed income.

Q2: How often do I need to recertify my income?
A: Annually. Your payment amount may change if your income or family size changes.

Q3: Are all federal loans eligible for IBR?
A: Most are, including Direct Loans and FFEL Program loans. Private loans are not eligible.

Q4: What's the difference between IBR and PAYE/REPAYE?
A: These are similar plans with different percentages (10% vs 15%) and eligibility requirements.

Q5: Is there loan forgiveness with IBR?
A: Yes, after 20-25 years of qualifying payments, any remaining balance may be forgiven.