The Income-Based Repayment Plan is experiencing a sudden heyday due to recent regulatory changes to the federal student loan repayment system. IBR, as it’s better-known, is actually the oldest of the income-driven repayment plans and was created in 2007 as part of the College Cost Reduction and Access Act of 2007, which also created Public Service Loan Forgiveness (PSLF). Initially, it capped payments on federal student loans at 15% of the borrower’s monthly income. For borrowers not pursuing PSLF, the remaining balance on their federal loans would be forgiven after 25 years of repayment. Those figures were later revised, and any federal loans taken out after July 1, 2014 and repaid on an IBR plan would have payments capped at 10% of the borrower’s discretionary income and would be forgiven after 20 years of repayment.
With the later advent of the PAYE plan—which has similar terms to IBR in its later guise, but without the confusing variation depending on when they were issued—IBR took a bit of a back seat, especially when the SAVE plan was unveiled in 2023. Now, with the passage of the “One Big Beautiful Bill Act,” PAYE will be phased out and be replaced with the Repayment Assistance Plan, leaving IBR as the only existing repayment plan remaining. Further, the recent bill removed the Partial Financial Hardship requirement from IBR, meaning that any borrower will be able to qualify for it, regardless of income. This can be a big boon to many borrowers, especially those with larger incomes. Where RAP will have no payment cap—meaning that your payment balloons as your income increases, regardless of how high it gets—those on IBR will never have to pay more than what they would on the standard 10-year fixed payment plan.
Borrowers currently on PAYE or ICR don’t have to switch plans immediately, as they are expected to remain available until mid-2028. By then, however, those borrowers will need to switch to RAP or IBR. Borrowers on SAVE, however, should give us a call to figure out the best strategy for their loans. Remember, we’re always just an email away from answering all of your student loan conundrums!
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