What is an IBR?
IBR stands for Income Based Repayment Plan. It is a student loan repayment plan for federally guaranteed student loans. It allows you to substantially reduce and possibly eliminate your monthly payments for your student loans. ICR stands for Income Contingent Repayment Plan. For our purposes, they are basically the same thing but there are slight differences between them. The biggest is that the IBR is available when the Department of Education is your primary lender. ICR is available when you went through a company like Sallie Mae. There are other subtle differences between them but for our purposes they are not relevant to this discussion.
What does an IBR do?
In short, the IBR program allows you to make a lower monthly payment towards your federal student loans. It is possible to even make a $0 (ZERO) dollar payment through the IBR program! I know because I’ve not only helped my clients do it, but I’ve also done it myself. An IBR repayment plan lasts for one year and then must be renewed by you every year. Even if you are in an IBR plan where you are making a zero payment, the government still picks up the bill on paying the interest on the subsidized portion of your student loans. Uncle Trump doesn’t pay the unsubsidized portion. If you are on a $0 plan, you must pay the unsubisdized portion’s interest or your balance will get bigger.
One of the best aspects of the plan is the long term aspects. You can be on an IBR for up to 25 years and after that the government forgives the remaining balance! Watch out because there could be tax implications but it’s a fantastic deal if you are on a lower income. A person earning about $30,000 a year can dramatically cut their payments if they have a high student loan balance even down to $0 per month. And, if this person renews the program each year, he could theoretically get the entire balance waived at the end f the 25 year period. Pretty cool, huh? There are many other aspects to the program, but you get the idea.
What will the Trump administration do to the IBR program?
One concern I hear from student loan borrowers is what will happen to the program after Trump takes power. As I write, today is the last full day of the Obama Administration. President-elect Trump has promised to repeal much of the Obama agenda instituted during the last eight years. This is important because, unfortunately, much of Obama’s progressive agenda has been instituted via executive order. Fortunately for us, the federal student loan IBR program isn’t one of them. The IBR program is authorized and codified under U.S. law under 20 U.S. Code § 1098e. This means that the IBR program will survive the initial impact of the Trump administration. Which means you can rest assured that the program will remain available after President Trump is sworn into power.
How do I find out if I qualify for an IBR for my student loans?
If you have student loans and wonder if you can take advantage of this program, you can either head to studentloans.gov to get the application process started yourself. If you’d like more information about the program or would like some professional help getting into it, feel free to give us a call at 214-396-6099 to schedule a consultation.