FedLoan Servicing offers a variety of Income-Driven Repayment (IDR) plans. One of the IDR plans that FedLoan offers is Income-Based Repayment plan. This is a federal student loan repayment program which sets the amount of your debt each month based on your family size and income.
With FedLoan, there will be certain calculations to determine how much you need to pay per month. Basically, the payment for Income-Based Repayment is based on your income. You may wonder how much you should spend to pay for your IBR plan. Let’s dive into our post to find out the real information about it!
How Does FedLoan Calculate IBR’s Monthly Payment?
According to FedLoan official site, FedLoan actually offers the IBR plan with monthly payment as low as $0 per month. The IBR payment amount is based on your income and family size.
With an extended repayment period, FedLoan also offers loan forgiveness after 25 years of qualifying payment (20 years for new borrowers). Here are the payments and term how Fedloan calculates the IBR monthly payments:
- Reduced monthly payments will be calculated using your discretionary income and family size.
- The payments are commonly 15% of your discretionary income (10% for new borrowers).
- The payments are also made for up to 25 years.
Aside from FedLoan’s payments and term, there are also some important information you should know about FedLoan IBR plan monthly payments:
- If you are married and submit a joint federal income tax return, your spouse’s eligible student loan debt and adjusted gross income will also be considered, unless you cannot or are separated to get your spouse’s income information.
- Due to the information used to calculate your payment may change from year-to-year, you should recertify annually for IBR.
It’s important to note, a new borrower for the IBR plans does not have outstanding balance on a Direct or FFEL Program loan as of July 1, 2014 or has not outstanding balance on a Director or FFEL Program Loan as he or she gets a new loan on/after July 1, 2014.
Because IDR plans are typically based on family size, income and state of residence, there are a bunch of reasons why your payment would increase after you recertify, including:
- Your family size changes (example: getting married)
- Your income increased
- You moved
What Is an Income-Based Repayment (IBR) Plan?
The Income-Based Repayment (IBR) plan is one of federal student loan repayment programs where the amount of your payment will be capped at the lower of a certain percentage of your discretionary income or the amount that you would pay under the 10-year Standard Repayment Plan.
Furthermore, the percentage rate actually depends on when you picked out the loan and if you had existing federal student loans. The percentage of your discretionary income will be 10% if you borrowed on or after july 1, 2014 and if you are a new borrower or had no outstanding balances on a federal student loan as you received the new loan. Then, the percentage of your discretionary income will be 15% if you borrowed your first loan before July 1, 2014.
How to Apply for a FedLoan IBR Plan?
Since the Income-Based Repayment (IBR) plan is based on your income and family size, we think that this plan is very recommended for those who want to get a lower monthly loan. If you have a plan to take the FedLoan IBR plan, it’s a great time for you to apply for the FedLoan IBR plan.
Here’s how to apply for a FedLoan IBR plan!
- First, you have to sign into FedLoan with your account here.
- Once you sign into FedLoan, you need to fill out the application form.
- In the case of filling out the form, you should provide your personal information including your name, your SSN, your address, your email, your state, zip code, etc.
- Then, you may also need to read carefully the income information, since this section provides the income information based on your states; single or married.
- After that, you also need to understand the instructions for documenting current income.
- Make sure to know the eligibility of the Income-Driven Plan.
- You may also need to choose the simple payment amounts that provide repayment estimates under the traditional and IDR plans.
- You may be also required to use the IRS Data Retrieval Tool to transfer income information from your federal income tax return.
- You should also review and sign the application.
- After that, FedLoan will receive your information for processing.
Congratulations! You successfully apply for the FedLoan IBR plans or other IDR plans. You can visit the Federal Student Aid site to find out more information about it here.
Can You Get IBR Lower Monthly Payment?
With IBR, you definitely will gain a lower payment if your federal student loan debt is high relative to your income and family size. You can also use the U.S. Department of Education’s Loan Simulator to estimate whether or not you would likely benefit from an IBR plan, while your loan servicer will do the calculation to determine your eligibility.
Furthermore, the Department of Education’s Loan Simulator will look at your income and family size to measure the amount of your monthly payment. In this case, the government will pay the difference for the first three years and your overall balance will not increase, if you have a subsidized loan and your monthly IBR payment.
However, you will not qualify for the IBR plan, if IBR will not lower your monthly payments compared to a 10-year Standard Repayment Plan. Any remaining balances of your loans will be forgiven once you create payments for 20 or 25 years if the loans are not repaid by then.
For more information, you will get approved for up to 12 months at that payment amount when you first enroll in an IDR plan. Near the end of the 12 months, you will have to recertify to have your payments based on your income set up for the following 12 months. Certainly, you have to submit a new request and income documentation every year.