What Is IBR?
Income-Based Repayment (IBR) is a federal repayment plan that caps your monthly student loan payment at a percentage of your discretionary income. Unlike the SAVE Plan (currently blocked by a court injunction) and PAYE (closed to new enrollees), IBR is fully operational and open to all eligible federal borrowers as of April 2026.
How IBR Payments Are Calculated
Your IBR payment depends on when you first took out federal student loans:
If your first federal loan was disbursed on or after July 1, 2014 (New IBR):
- Monthly payment = 10% of discretionary income
- Discretionary income = your adjusted gross income (AGI) minus 150% of the federal poverty line for your family size
- Forgiveness after 20 years of qualifying payments
If your first federal loan was disbursed before July 1, 2014 (Old IBR):
- Monthly payment = 15% of discretionary income
- Same discretionary income formula
- Forgiveness after 25 years of qualifying payments
In both cases: If your IBR payment would be higher than your standard 10-year payment, your payment is capped at the standard amount.
2026 Poverty Line Reference (IBR Calculation)
The 2026 federal poverty line used for IBR calculations:
- Family of 1: $15,060 ($22,590 at 150%)
- Family of 2: $20,440 ($30,660 at 150%)
- Family of 3: $25,820 ($38,730 at 150%)
- Family of 4: $31,200 ($46,800 at 150%)
Example: A family of 1 earning $50,000 AGI has discretionary income of $50,000 − $22,590 = $27,410. Their new IBR payment would be 10% ÷ 12 = $228/month.
Who Qualifies for IBR?
You qualify for IBR if:
- You have Direct Loans or FFEL Loans (FFEL can qualify for IBR, unlike SAVE)
- You have a partial financial hardship — meaning your IBR payment is lower than your standard 10-year payment
- You are not in default
Private loans do not qualify. Perkins Loans can qualify if consolidated into a Direct Loan.
IBR vs. SAVE vs. PAYE in 2026
| Plan | Status | Payment | Discretionary Income % | Forgiveness | |---|---|---|---|---| | IBR (new) | Available | 10% DI | 150% poverty line | 20 years | | IBR (old) | Available | 15% DI | 150% poverty line | 25 years | | SAVE | Blocked (injunction) | Was 5–10% DI | 225% poverty line | 20–25 years | | PAYE | Closed to new enrollees | 10% DI | 150% poverty line | 20 years | | ICR | Available | 20% DI or fixed 12-yr | 100% poverty line | 25 years |
Bottom line for 2026: If you can't enroll in SAVE (blocked) or PAYE (closed), IBR is your primary income-driven option.
IBR and PSLF
IBR qualifies for Public Service Loan Forgiveness (PSLF). If you work for a qualifying government or nonprofit employer, your remaining balance after 120 qualifying IBR payments (10 years) is forgiven tax-free.
This is particularly important right now: if you were enrolled in SAVE and your payments are paused, those months do not count toward PSLF. Switching to IBR resumes your progress.
Switching to IBR
To enroll in IBR:
- Log in to your loan servicer's website or go to studentaid.gov
- Submit the Income-Driven Repayment Plan Request form
- You'll need your most recent tax return for income verification
- Processing typically takes 2–4 weeks
You can also recertify your income annually to keep your payment adjusted. If your income drops significantly, you can request early recertification.
IBR Annual Recertification
Every 12 months, you must recertify your income to stay on IBR. If you miss recertification:
- Your payment may jump to the standard 10-year amount
- Interest may capitalize (be added to your principal)
- You'll stay on IBR but at the higher payment until you recertify
Set a calendar reminder for 60 days before your recertification date.
Interest and Capitalization on IBR
IBR does not have the SAVE Plan's interest subsidy (which was blocked anyway). If your IBR payment doesn't cover all accruing interest, unpaid interest accumulates — but it only capitalizes (gets added to principal) in specific circumstances, such as when you leave IBR or miss recertification.
IBR Forgiveness: Is It Taxable?
IBR forgiveness after 20 or 25 years may be taxable as ordinary income in the year it's forgiven (this is different from PSLF, which is always tax-free). The tax treatment of IDR forgiveness is subject to change by Congress. Plan for potential tax liability on forgiven amounts.