IS IBR payment always based off of your original loan amount or is it based on the current loan amount? I continue to get conflicting answers to this question when I call my servicer.

Neither…your IBR monthly payment amount is strictly based on your income and family size, regardless of your loan size. The only time your total loan amount is factored in is when they determine whether or not you are eligible for IBR. If your loan amount is too small, and they calculate your monthly amount (based on your income) and that monthly amount is the same or more than the 10 year standard repayment plan, you wouldn’t qualify. In simple terms, people with large loan amounts have an easier time of qualifying for IBR than people with small loan amounts. Payments are only based on income and family size. If you are asking whether or not they look at your original loan amount vs your original loan amount plus all accrued interest for determining your eligibility, I’d say the latter, because they look at how long it’d take you to pay everything off in 10 years, and interest is definitely a factor!

Thank you or your response! I am currently under IBR and my payment amount is very small 24.00 a month . My interest is not being touched and my amount owed is increasing considerably. My income is also increasing , to the point that I may no longer have my payment based on the income (at least that is what my servicer told me). So, will my monthly payment then be based on the original amount I owed, the current amount owed, or my income for the year?  I am trying to decide if I should currently pay down my interest or would it really be worth it in the long run? I appreciate your help immensely!

The amount that you’ll owe per month will never be above what you would have paid being on a standard 10 year repayment plan. So, if you have a loan balance of $100,000 at the standard 6.8% interest rate, to pay it off in ten years would be about $1,150 per month. If they calculate that 15% of your income is now $1,300, it will cap at $1,150 and that’s all you’d have to pay. I’m not sure what exactly happens at that point, but I’ve read that they technically keep you in IBR, but remove your financial hardship status, capitalize any interest, and you move to some special standard repayment plan, but you are still technically under IBR and eligible for the 20 or 25 year forgiveness should your income drop and it isn’t paid off after 10 years. You’d probably have to recertify to get your payments lowered in case you lost your job or took a lower paying position. That’s the nice thing about IBR, is that your payments will never be higher than the 10 year payoff. Under ICR, I believe it is not capped, so if you make a ton, you are going to pay a ton.

If you think you’ll be losing your financial hardship status, I might try to pay off the interest because you don’t want it to capitalize, but if you are planning to go through PSLF then it might be money wasted. In that case, I’d just put extra money into savings and keep it there until I know the loan is forgiven.