The U.S. Department of Education started offering a new repayment schedule for individuals who take out federal student loans. The Income Based Repayment Plan, or IBR, lets graduates reduce their monthly loan payments based on their income.
The new plan, which started July 1, comes as many college graduates are entering an unstable economic environment.
“We know today’s borrowers are concerned about their ability to repay student loans in the current economic environment,” said Arne Duncan, the U.S Secretary of Education. “This new plan addresses the issue head-on by giving them the option of a reduced monthly payment tied to their annual income.”
The IBR plan is only for federal loans such as the widely used Stafford loan. The plan is also available for the actual college graduate, but not parents that took out the loan.
“You may enter IBR if your federal student loan debt is high relative to your income and family size,” according to studentaid.ed.gov.
The plan is ideal for “people who need advanced degrees to get low-paying jobs,” said Edie Iron, spokeswoman for The Project on Student Debt to the San Francisco Chronicle.
Borrowers can go to studentaid.ed.gov to use an IBR payment calculator to figure out how much their monthly loan payment can be reduced under the new plan.
The IBR also includes the 10-year Public Service Loan Forgiveness. This is for borrowers who work in public service and have reduced monthly payments. After 10 years in public service, while making monthly payments, the loan can be completely forgiven.
Borrowers that are making under $16,000 a year will not have to make monthly payments while in that income bracket.