Income-based repayment (“IBR”) is a relatively new option available for federal student loan borrowers, and it can save you literally thousands of dollars. Unfortunately, many people who are still paying off their student loans don’t know about this program. Even if you are currently on a different repayment plan, you may be able to switch.
IBR is exactly what it sounds like it is: repayment plan that is based on your income; specifically, your adjusted gross income (AGI). The Department of Education uses a formula to calculate your monthly payment that takes into account your AGI, your family size, and your total federal student debt, and comes up with an payment amount for you that is generally between 10-15% of your monthly income, even if you have a large loan balance.