Student loans can be a burden on the budget for anyone. But what happens when those monthly payments seriously start impacting your bottom line? You can only use deferment for so long, depending on the situation. And defaulting on a loan has horrible repercussions on your credit. Plus, student loans cannot be written off in bankruptcy. So there are only so many options.

Good thing the federal government has a few programs to help alleviate this burden. One, which was enacted in 2009, is called the Income-Based Repayment. This program is exactly what it sounds like. You pay what the lender determines you can afford based on how much you make (with a couple of other factors thrown into the mix, like dependents and marital status).

Income-based repayment is extremely easy to take advantage of.

  1. First, make sure your loans qualify. Most do, so it's easier to list the ones that don't: PLUS loans made to parents, consolidated loans that include underlying PLUS loans made to parents, and private education loans.
  2. Then, use the calculator at to see if filling out the paperwork is worth your time. It definitely was for me. I was originally paying almost $600 a month on my graduate school loans. The IBR calculator estimated I could afford $120 a month. Big difference!
  3. Now fill out the income-based repayment paperwork. Your lender's website should offer a link to the form. You will need to fill one out for each lender. My lender for my grad school loans doesn't even require I log in. There was simply a link to "Forms" on the first page. Let’s hope your lender makes it just as easy. Although it seems like a lot, of the five pages only two of them have anything to fill out. Don't get discouraged!
  4. After filling it out, mail this in with a copy of your most recent tax return. Follow up with your lender if you don't hear from them within four weeks. The first time I filled it out, my loan was listed under "paid ahead" status, since I actually paid my loans in full and on time. Evidently they can't process the application in “paid ahead” status. They also weren't going to bother to call and tell me. So I called and they explained. I asked them to take me out of “paid ahead” status so they could process the application. Easy enough.
  5. Wait for your new coupon booklet. Although the IBR calculator had estimated my payment at $120, my lender determined I should pay $112 a month. What a difference from the original $600!
  6. Renew every year. You will have to fill out the paperwork again every year. But lenders are making it easier as they get more comfortable with the program. Mine now mails me the form every year as a reminder.

It’s such an easy process and well worth the time. Plus, payments can be adjusted according to circumstances. For example, I lost my job. I still continued to pay my loans but, because of IBR, my lender calculated I could only afford $8 a month. This adjustment made it easier to pay, avoiding default and deferment, neither of which a credit-conscious person wants. This program works wonders on a tight budget. It’s not a way to eliminate debt, but it is a good way to make your current debt more manageable.

This is a guest post by Elizabeth from Cincinnati, Ohio
Find out more about the KCL Contributor Network!