Beginning 7/1/09 federal student loan borrowers can take advantage of the new Income Based Repayment (IBR) Option available to assist with repayment. Borrowers with high debt and lower income levels can benefi t from this option especially during these economic times. Borrowers also pursuing careers in public service can benefi t from this option.

Monthly payments are based on income, not level of indebtedness. For example, a borrower ith a total  indebtedness of 40,000.00 in federal loans would generally be required to pay  $ 460.32/month with a standard 10 year repayment plan. If that borrower’s AGI was 35,000.00 /year they could take advantage of IBR and cap their monthly payment at $ 234.44/month. Documentation regarding a borrower’s annual income level must be collected by the lender or servicer in order to process the IBR option for a borrower. The IRS is working on electronic communication options for this but in the interim, paper needs to be exchanged. Until electronic communication is available the DOE is allowing lenders to request borrowers submit a copy of their most recent federal tax return with an original “pen and ink” signature. However, lenders have the option to obtain written certifi cations from borrowers or other documentation to verify income information.  Additional information on this topic is available in a DOE Electronic Announcement posted 6/12/2009

by Jeff Baker, Director Policy Liaison and Implementation, Federal Student Aid