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Student Loan Income-Based Repayment Plan

By Nicholas Ortiz, Boston Bankruptcy Attorney

The Income-Based Repayment Plan (“IBR”) for student loans is designed to be a better plan than the older Income-Contingent Repayment Plan (“ICR”). Here are some details:

* The IBR applies to Direct Loans and government-guaranteed FFEL student loans.
* You cannot be in default and enter the IBR, but after you get out of default, you can enter the IBR.
* You must be eligible for the IBR. What is required is “Partial Financial Hardship.” You can read more about the formula for determining eligibility for student loan income-based repayment here, but the basics are that there is a minimum income requirements to enter the IBC. Your required payment can be zero, but it is based on your income level and family size.
* Debt Forgiveness: After 25 years in the IBR, your student loan debt is forgiven. However, the forgiven amount is taxable to you unless you qualify for an exception like the insolvency exception.

To gain entry to the IBC you should request an application from your student loan servicer.

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Full post as published by Credit Law Network on March 23, 2011 (boomark / email).