Student Startup Plan
Is student loan debt stopping you from starting
your own business? The Income-Based Repayment (IBR) Plan can help.
Income-Based Repayment is an existing payment option for Federal student loans. The Income-Based
Repayment Plan supports young college grads, including those looking to start a business, join a
startup, or work in a public service job by making Federal student loan repayment manageable. It can
help you keep your loan payments affordable by using a sliding scale to determine how much you can
afford to pay on your Federal loans—empowering you to take risks with new opportunities.
Mark graduated from college in 2005. After working full-time for a year, he went to
graduate school and got an MBA. He is a clean energy entrepreneur who recently started a business, and his
annual income is $15,000. His undergraduate and graduate student loan payments total almost $500 a month.
Since both of Mark's student loans are federal loans, he was able to switch both loans to an IBR payment
Payment before IBR: $460/month
Payment under IBR: $0/month
Alison got a full college scholarship but is taking out loans to pay for graduate
school. She will have to make payments on her Direct PLUS Loan, a federal student loan, when she graduates.
She has a job offer from a nonprofit organization. Alison wants to take the job, but is worried about paying
back her student loans on a $30,000 salary. When Alison graduates, her Direct PLUS Loan debt will be
eligible for an IBR payment plan. After 10 years, her loans may be forgiven under the Public Service Loan
Payment before IBR: $350/month
Payment under IBR: $171/month
Cory is a college student who is set to graduate next spring. Together with two
friends, he plans on starting a business right after graduation. He also already has a job offer from the
company where he holds an internship. Working part-time for them, he will earn $25,000. He has a private
loan with a $147 monthly payment and a Direct Stafford Loan with a $173 monthly payment. Although Cory's
private debt is not eligible for IBR, his federal student debt is eligible.
Payment before IBR: $320/month
Payment under IBR: $255/month
Annual savings: $780
*The above case studies are fictitious examples that represent how Income-Based Repayment and
Public Service Loan Forgiveness can help students and recent graduates manage their student loan payments.
Can't see the case studies? View the
What Is Income-Based Repayment?
Young entrepreneurs are key to our
economic success now and in the future. If student loan payments are standing in your way, the Federal
government can help. The Income-Based Repayment Plan can help you keep your Federal loan payments affordable
with payment caps based on income and family size. For low-income student-loan borrowers, Income-Based Repayment
limits loan payments to 15% of discretionary income. Last
year, the President proposed, and Congress enacted, a plan to further ease student loan debt payment by lowering
the IBR loan payment to 10 percent of income, and the forgiveness timeline to 20 years. This change is set to go
into effect for all new borrowers after 2014—mostly impacting future college students.
For a single graduate, Income-Based Repayment options look like the amounts in the table below. To find out what
your payment would be, use the IBR
| Annual Income
| IBR Monthly Payment
If you earn less than $20,000 in annual income, the Income-Based Repayment is zero. If your monthly Income-Based
Repayment payment amount does not cover the interest that accrues on your loans each month, the Federal
government will pay your unpaid accrued interest for up to three consecutive years from the date you began
repaying your loans under the Income-Based Repayment Plan. After 25 years, any remaining balance on your Federal
student loan debt will be cancelled. In some cases, your student loans may be eligible for forgiveness after
just 10 years. Click on “Working in Public Service” below to find out more.
Learn more about the Income-Based
Repayment Plan at Student Aid on the Web from the U.S. Department of Education.
How Do I Take Advantage of Income-Based Repayment?
Eligible Federal student loan borrowers in both the Federal
Direct Loan and Federal Family Education
Loan Program (FFELP) Loan programs can take advantage of Income-Based Repayment. The program covers most
types of federal loans made to students, including Stafford, PLUS, and Consolidation Loans. The loans can be new
or old, and for any type of education, such as undergraduate, graduate, professional, and job training.
To qualify for Income-Based Repayment, you have to have enough debt relative to your income and have "partial
financial hardship". That means the monthly amount you would be required to pay on your IBR-eligible loans
under a Standard Repayment Plan with a 10-year repayment period is higher than the monthly amount you would be
required to repay under IBR.
The IBR monthly payment amount is based on your annual Adjusted Gross
Income (AGI) and family size. Specifically, the maximum annual amount you are required to repay under IBR during
any period when you have a “partial financial hardship” is 15 percent of the difference between your
AGI and 150 percent of the U.S. Department of
Health and Human Services (HHS) Poverty Guideline amount for your family size and state. This annual
repayment amount is then divided by 12 to determine your monthly IBR repayment amount.
You must contact each of the servicers that service your loans to apply for Income-Based Repayment. If you are
unsure who holds your loans or who your loan servicer is, you can access the U.S. Department of Education’s
National Student Loan Data System (NSLDS) website at www.nslds.ed.gov
or call the Federal Student Aid Information Center at 1-800-4-FED-AID (1-800-433-3243; TTY 1-800-730-8913).
To switch to an Income-Based Repayment Plan, graduates must contact their lenders directly and are generally
asked to fill out an application form and wait for approval. The waiting period is on average a few weeks but
may differ between specific lenders. While the process is relatively straightforward, a graduate must contact
each loan provider separately to switch each particular loan to Income-Based Repayment.
For more information on Income-Based Repayment, check out the Department of Education's FAQs.
You must contact each of the servicers that service your loans to apply for Income-Based
Repayment. If you are unsure who holds your loans or who your loan servicer is, you can access the U.S.
Department of Education’s National Student Loan Data System (NSLDS) website at www.nslds.ed.gov or
call the Federal Student Aid Information Center at 1-800-4-FED-AID (1-800-433-3243; TTY 1-800-730-8913).
To switch to an Income-Based Repayment Plan, graduates must contact their lenders directly
and are generally asked to fill out an application form and wait for approval. The waiting period is on
average a few weeks but may differ between specific lenders. While the process is relatively
straightforward, a graduate must contact each loan provider separately to switch each particular loan to
If you start a nonprofit 501(c)(3) organization or join a nonprofit 501(c)(3)
organization, your federal student loans may be eligible for Public Service Loan Forgiveness (PSLF). This
program forgives remaining student debt after 10 years of eligible employment and qualifying loan payments.
During those 10 years, Income-Based Repayment can help make your payments affordable. Learn more about Public Service
Loan Forgiveness, and find out of your job is eligible, at Student Aid on the Web.