Income Limits for Income-Based Repayment: What You Need to Know

• No specific income cap for qualifying for IBR. What matters is whether you have a partial financial hardship, meaning your IBR payment would be lower than the standard 10-year plan payment.

• IBR eligibility is determined by your income and your spouse’s income if you’re married and file taxes jointly. Income from other household members is not included.

• Income limits for IBR are tied to your loan balance and discretionary income, which is based on your household size and 150% of the federal poverty guideline.

The Income-Based Repayment Plan is designed to help people with lower incomes by adjusting monthly payments to fit what they can realistically afford—not how much they owe. The income limits are calculated based on factors like your earnings and household size relative to the federal poverty line.

Here’s what we’ll cover in this article:

• How the IBR income limits work and misconceptions

• Who qualifies for an IBR plan

• Documents you need to qualify

We’ll walk you through how IBR income limits can give you better control over your student loan repayment plan. Read on to the end so you don’t miss any important details.

Related: SAVE Plan Income Limits

Income limits for Income-Based Repayment determine if you qualify for the plan by comparing your income to the cost of payments under the 10-year Standard Repayment Plan. If your income is low enough that IBR payments would be more affordable than the standard plan, you meet the criteria.

These limits are based on your discretionary income—the amount of your income exceeding 150% of the federal poverty guideline for your household size and location.

Related: Income-Based Repayment Chart

IBR Income Limit Misconceptions

There are several common misunderstandings about IBR income limits:

1. Income Caps: IBR doesn’t have a fixed salary limit. Instead, eligibility depends on how your income compares to your loan balance and household size—not on a strict income cutoff.

2. Household Size and Geography: The federal poverty guideline adjusts based on your household size, meaning larger households allow for higher income thresholds. Additionally, geographic variations in poverty guidelines can influence eligibility slightly.

You qualify for Income-Based Repayment if:

• Your Loans Are Eligible: Only federal student loans qualify. This includes Direct Loans, FFEL Loans, and Direct Consolidation Loans. Parent PLUS Loans do not qualify unless they’ve been consolidated into a Direct Consolidation Loan.

• Your Income Meets the Criteria: Your monthly payment amount under IBR must be lower than the amount you’d pay on the standard 10-year repayment plan. Borrowers with lower incomes or high loan balances typically benefit the most.

Let’s look at an example.

If your discretionary income is $30,000 and your federal poverty guideline is $20,000, your discretionary income would be $10,000. Under IBR, your student loan payment might be $100—much lower than the $400 standard payment—making you eligible.

You don’t qualify for Income-Based Repayment because you either don’t have a partial financial hardship, your loans are ineligible, or you have documentation issues.

Let’s break this down:

• You Don’t Have a Partial Financial Hardship: To qualify for IBR, your monthly payment under the plan must be lower than your payment under the standard 10-year repayment plan. If your income is too high compared to your loan balance, you won’t meet this requirement.

• Your Loans Are Ineligible: Only certain federal loans qualify for IBR. Parent PLUS Loans, for example, aren’t eligible unless consolidated into a Direct Consolidation Loan. Private loans also do not qualify for IBR.

• You Have Documentation Issues: Missing or incomplete proof of income, family size, or other required documents can lead to delays or denial. Always ensure your information is accurate and up-to-date.

Tips for Troubleshooting

• Check Your Loan Type: Verify your loan eligibility on studentaid.gov. If your loans don’t qualify—such as Parent PLUS Loans—consider using the double consolidation loophole to make them eligible for other income-driven repayment plans before the option closes.

• Fix Documentation Errors: Common errors include missing your spouse’s income information if you file income taxes jointly or providing outdated proof of income. Double-check that you’ve selected the right plan on your application and included all required details, like your household size.

• Explore Alternatives: If you still don’t qualify, look into PAYE, which may offer more flexible criteria and benefits.

You can calculate your IBR eligibility by looking at your Adjusted Gross Income (AGI), family size, and monthly payment under the 10-year standard plan. Let’s break that down:

1. Determine Your Discretionary Income: Discretionary income is the difference between your annual income and 150% of the federal poverty guideline for your household size. For example, if your AGI is $50,000 and 150% of the poverty guideline is $30,000, your discretionary income is $20,000.

2. Compare Monthly Payments: Calculate your IBR payment, which is typically 10-15% of your discretionary income, and compare it to your standard 10-year repayment plan payment. If the IBR payment is lower, you qualify.

3. Use an Online Calculator: To simplify the process, use a reliable tool like the Federal Student Aid Loan Simulator. This calculator can help estimate your payments and eligibility.

Example: Let’s say your AGI is $40,000, and you have a family size of two. The poverty guideline for your household is $25,000, leaving you with $15,000 in discretionary income. Under IBR, you’d pay 10-15% of that annually, which is $125 to $188 monthly. If your standard payment plan is $400, you will qualify for IBR.

To apply for or recertify an Income-Based Repayment plan, you’ll need to provide proof of income, family size, and loan details. Here’s a breakdown of what you’ll need based on your situation:

• If You’re Employed: Submit a recent pay stub or your most recent tax return. Use a pay stub if your tax return doesn’t reflect your current income due to one-time earnings, like bonuses or stock sales.

• If You’re Self-Employed: Provide a signed statement certifying your income or use your tax return if it accurately reflects your earnings. If you pay yourself through payroll, a pay stub may be acceptable.

• If You’re Retired: Submit your Social Security benefits statement or documentation of pension or retirement account distributions. Only the taxable portion of these benefits is considered for IBR calculations.

• If You’re Unemployed or a Stay-at-Home Parent: Provide a statement declaring $0 income. If you’re married and file taxes jointly, include your spouse’s income documentation.

If you don’t qualify for Income-Based Repayment, don’t worry—everyone qualifies for an income-driven repayment plan. The question becomes whether you can afford the payments or if another plan better suits your situation.

Here’s how to sort through your options:

• Consider the SAVE Plan: The SAVE plan has no income cap, but if you earn a high income, your payments may be higher than under the standard 10-year repayment plan. Additionally, the ongoing litigation surrounding SAVE may limit future enrollments.

• Explore ICR: ICR may be available for borrowers not qualifying for IBR. Although the plan was previously closed to new borrowers, the U.S. Department of Education is in the process of reopening it for new enrollment. Learn more about Income-Contingent Repayment.

• Look Beyond IDR Plans: If you can’t afford payments under any IDR plan, you may need to explore options like the Standard, Extended, or Graduated Plans or refinancing through a private lender. But be careful with refinancing. Yes, it can lower your interest rate, but it eliminates federal protections like IDR plans and loan forgiveness options.

If you’re confused about IBR or struggling to decide what’s best for you, our student loan experts can help. We know the feeling of being lost in a decision. Count on us to bring clarity to your choices.

Related:

• Standard Repayment Plan

• Graduated Repayment Plan

• Extended Repayment Plan

• How to Refinance Student Loans

The IBR income limits aren’t a hardline. Whether you qualify for IBR or not comes down to your income, family size, and loan balance.

If you don’t qualify, other Income-driven repayment plans, like SAVE or PAYE, might better suit your situation. The right plan can make a big difference in reducing your monthly payments and easing your financial burden.

Still, have questions about your repayment options? Book a consultation with one of our student loan experts today. We’ll help you sort through the complexities of student loans and find the best path forward for your financial future.

Related reading:

• • Saving on a Valuable Education Plan

  • Pay As You Earn Plan

  • Income-Contingent Repayment Plan

  • How Do I Change My Student Loan Repayment Plan?

  • Student Loan Repayment Options