What are the negative aspects of the Income-Based Repayment (IBR) Plan?
While IBR is designed to help borrowers who are experiencing “partial financial hardship,” it may result in the required monthly loan payment being less than the accrued interest (referred to as negative amortization). This unpaid interest increases the total debt even though the loan is in the process of being repaid. Borrowers also must provide verification of their adjusted gross income and household size on an annual basis to continue participating in the plan. Finally, the required monthly payment will be adjusted annually to reflect changes in adjusted gross income, household size and the federal poverty guidelines.
