Middle- and high-income student loan borrowers attending graduate and professional school will see "significant new benefits" from the revised federal Income-Based Repayment (IBR) program, according to a recently released report by the Washington, D.C.-based think tank the New America Foundation.
IBR was established in 2007 under the Obama administration and revised in 2010. The program was intended to provide flexibility to recent college graduates as they start repaying their college loans, especially early in their careers when their incomes may be low. The IBR program requires borrowers to demonstrate "financial hardship," as demonstrated on any of several calculators that determine the ratio of the borrower's adjusted gross income to student loan.
According to the foundation's report, using the adjusted gross income—rather than the student's entire income—in determining hardship means that that middle- and high-income borrowers with high debt will derive greater benefits from the program. These higher-income borrowers can reduce their adjusted gross income through pre-tax contributions and other deductions on their income tax. These reductions, says the report, not available to low-income borrowers, skew the ratio of adjusted gross income to student loan debt.
Other changes in the IBR program that benefit borrowers include loan forgiveness after 20—rather than 25—years, and a new repayment cap of 10% of a borrower's adjusted gross income, down from 15%. Borrowers of Federal Direct Loans, regardless of eligibility for or enrollment in the IBR program, may be eligible for loan forgiveness after 10 years of public service and repayment.
Future borrowers, current graduate students, and recent graduates in speech-language pathology and audiology should carefully examine these programs before committing to a repayment plan.