Title 20 — EducationRelease 119-73
§1098e Income-based repayment
Title 20 › Chapter CHAPTER 28— - HIGHER EDUCATION RESOURCES AND STUDENT ASSISTANCE › Subchapter SUBCHAPTER IV— - STUDENT ASSISTANCE › Part Part G— - General Provisions Relating to Student Assistance Programs › § 1098e
Summary
Lets borrowers with federal student loans under parts B and D choose a payment plan that ties their monthly bill to their income. Parent PLUS loans made for a dependent student and consolidation loans that paid off those Parent PLUS loans are mostly excluded (a consolidation loan that was being repaid under the ICR plan as it existed on June 30, 2023, or another income-driven plan at any time from July 4, 2025 through June 30, 2028, is not treated as excluded). The monthly cap is the “applicable amount” divided by 12. The applicable amount is 15% of the difference between the borrower’s (and spouse’s, if any) adjusted gross income and 150% of the poverty guideline for their family size. For loans made to a new borrower on or after July 1, 2014 and before July 1, 2026, use 10% instead of 15%. Payments are applied to interest first, then fees, then principal. If a borrower’s reduced payment does not cover interest on subsidized loans, the Department will pay that unpaid interest for up to 3 years after the borrower signs up (not counting certain economic-hardship deferments). Unpaid interest is added to the loan balance when the borrower leaves the plan or starts paying at least the standard 10-year amount; unpaid principal is deferred. Repayment can last longer than 10 years. If the income-based payment would be higher than the borrower’s original 10-year standard payment when they first chose the plan, the monthly maximum becomes that original 10-year amount, and the repayment time may still extend beyond 10 years. After a prescribed period not to exceed 25 years (20 years for the earlier loan group), the Secretary will cancel any remaining balance if the borrower elected income-based repayment and met the required payment or deferment conditions. Borrowers can switch anytime to the standard plan or a Repayment Assistance Program. The Secretary will set yearly rules to verify income and loan totals, may use tax-return data under section 6103(l)(13) (with approval under section 1098h) to set payments, and must let borrowers opt out of that and supply their own information or update the tax data before payments are set. A married borrower who files taxes separately is judged only on their own adjusted gross income. Lender special-allowance payments are calculated on the loan principal and any unpaid accrued interest.
Full Legal Text
Title 20, §1098e
Education — Source: USLM XML via OLRC
(a)In this section:
(1)The term “excepted PLUS loan” means a loan under section 1078–2 of this title, or a Federal Direct PLUS Loan, that is made, insured, or guaranteed on behalf of a dependent student.
(2)(A)The term “excepted consolidation loan” means—
(i)a consolidation loan under section 1078–3 of this title, or a Federal Direct Consolidation Loan, if the proceeds of such loan were used to discharge the liability on an excepted PLUS loan; or
(ii)a consolidation loan under section 1078–3 of this title, or a Federal Direct Consolidation Loan, if the proceeds of such loan were used to discharge the liability on a consolidation loan under section 1078–3 of this title, or a Federal Direct Consolidation Loan described in clause (i).
(B)The term “excepted consolidation loan” does not include a Federal Direct Consolidation Loan described in subparagraph (A) that, on any date during the period beginning on July 4, 2025, and ending on June 30, 2028, was being repaid—
(i)pursuant to the Income Contingent Repayment (ICR) plan in accordance with section 685.209(b) of title 34, Code of Federal Regulations (as in effect on June 30, 2023); or
(ii)pursuant to another income driven repayment plan.
(3)The term “applicable amount” means 15 percent of the result obtained by calculating, on at least an annual basis, the amount by which—
(A)the borrower’s, and the borrower’s spouse’s (if applicable), adjusted gross income; exceeds
(B)150 percent of the poverty line applicable to the borrower’s family size as determined under section 9902(2) of title 42.
(b)Notwithstanding any other provision of this chapter, the Secretary shall carry out a program under which—
(1)a borrower of any loan made, insured, or guaranteed under part B or D (other than an excepted PLUS loan or excepted consolidation loan), may elect to have the borrower’s aggregate monthly payment for all such loans not exceed the applicable amount divided by 12;
(2)the holder of such a loan shall apply the borrower’s monthly payment under this subsection first toward interest due on the loan, next toward any fees due on the loan, and then toward the principal of the loan;
(3)any interest due and not paid under paragraph (2)—
(A)shall, on subsidized loans, be paid by the Secretary for a period of not more than 3 years after the date of the borrower’s election under paragraph (1), except that such period shall not include any period during which the borrower is in deferment due to an economic hardship described in section 1085(o) of this title; and
(B)be capitalized—
(i)in the case of a subsidized loan, subject to subparagraph (A), at the time the borrower—
(I)ends the election to make income-based repayment under this subsection; or
(II)begins making payments of not less than the amount specified in paragraph (6)(A); or
(ii)in the case of an unsubsidized loan, at the time the borrower—
(I)ends the election to make income-based repayment under this subsection; or
(II)begins making payments of not less than the amount specified in paragraph (6)(A);
(4)any principal due and not paid under paragraph (2) shall be deferred;
(5)the amount of time the borrower makes monthly payments under paragraph (1) may exceed 10 years;
(6)if the monthly payment amount calculated under this section for all loans made to the borrower under part B or D (other than an excepted PLUS loan or excepted consolidation loan) exceeds the monthly amount calculated under section 1078(b)(9)(A)(i) of this title or 1087e(d)(1)(A) of this title, based on a 10-year repayment period, when the borrower first made the election described in this subsection (referred to in this paragraph as the “standard monthly repayment amount”), or if the borrower no longer wishes to continue the election under this subsection, then—
(A)the maximum monthly payment required to be paid for all loans made to the borrower under part B or D (other than an excepted PLUS loan or excepted consolidation loan) shall be the standard monthly repayment amount; and
(B)the amount of time the borrower is permitted to repay such loans may exceed 10 years;
(7)the Secretary shall repay or cancel any outstanding balance of principal and interest due on all loans made under part B or D (other than a loan under section 1078–2 of this title or a Federal Direct PLUS Loan) to a borrower who—
(A)at any time, elected to participate in income-based repayment under paragraph (1); and
(B)for a period of time prescribed by the Secretary, not to exceed 25 years, meets 1 or more of the following requirements—
(i)has made reduced monthly payments under paragraph (1) or paragraph (6);
(ii)has made monthly payments of not less than the monthly amount calculated under section 1078(b)(9)(A)(i) or 1087e(d)(1)(A) of this title, based on a 10-year repayment period, when the borrower first made the election described in this subsection;
(iii)has made payments of not less than the payments required under a standard repayment plan under section 1078(b)(9)(A)(i) or 1087e(d)(1)(A) of this title with a repayment period of 10 years;
(iv)has made payments under an income-contingent repayment plan under section 1087e(d)(1)(D) of this title (as such section was in effect on the day before the date of the repeal of section 1087e(e) of this title; or
(v)has been in deferment due to an economic hardship described in section 1085(o) of this title;
(8)a borrower who is repaying a loan made under part B or D pursuant to income-based repayment may elect, at any time, to terminate repayment pursuant to income-based repayment and repay such loan under the standard repayment plan or the Repayment Assistance Program under section 1087e(q) of this title; and
(9)the special allowance payment to a lender calculated under section 1087–1(b)(2)(I) of this title, when calculated for a loan in repayment under this section, shall be calculated on the principal balance of the loan and on any accrued interest unpaid by the borrower in accordance with this section.
(c)(1)The Secretary shall establish procedures for annually determining, in accordance with paragraph (2), the borrower’s eligibility for income-based repayment, including the verification of a borrower’s annual income and the annual amount due on the total amount of loans made, insured, or guaranteed under part B or D (other than an excepted PLUS loan or excepted consolidation loan), and such other procedures as are necessary to effectively implement income-based repayment under this section. The Secretary shall consider, but is not limited to, the procedures established in accordance with section 1087e(e)(1) of this title (as in effect on the day before the date of repeal of subsection (e) of section 1087e of this title) or in connection with income sensitive repayment schedules under section 1078(b)(9)(A)(iii) of this title or 1078–3(b)(1)(E) of this title.
(2)(A)The Secretary shall establish and implement, with respect to any borrower enrolled in an income-based repayment program under this section or under section 1087e(q) of this title, procedures to—
(i)use return information disclosed under section 6103(l)(13) of title 26, pursuant to approval provided under section 1098h of this title, to determine the repayment obligation of the borrower without further action by the borrower;
(ii)allow the borrower (or the spouse of the borrower), at any time, to opt out of disclosure under such section 6103(l)(13) and instead provide such information as the Secretary may require to determine the repayment obligation of the borrower (or withdraw from the repayment plan under this section or under section 1087e(q) of this title, as the case may be); and
(iii)provide the borrower with an opportunity to update the return information so disclosed before the determination of the repayment obligation of the borrower.
(B)Subparagraph (A) shall apply to each borrower of a loan eligible to be repaid under this section or under section 1087e(q) of this title, who, on or after the date on which the Secretary establishes procedures under such subparagraph (A)—
(i)selects, or is required to repay such loan pursuant to, an income-based repayment plan under this section or under section 1087e(q) of this title; or
(ii)recertifies income or family size under such plan.
(d)In the case of a married borrower who files a separate Federal income tax return, the Secretary shall calculate the amount of the borrower’s income-based repayment under this section solely on the basis of the borrower’s student loan debt and adjusted gross income.
(e)With respect to any loan made to a new borrower on or after July 1, 2014 and before July 1, 2026—
(1)subsection (a)(3)(B) shall be applied by substituting “10 percent” for “15 percent”; and
(2)subsection (b)(7)(B) shall be applied by substituting “20 years” for “25 years”.
Legislative History
Notes & Related Subsidiaries
Editorial Notes
References in Text
The date of the repeal of section 1087e(e) of this title, referred to in subsec. (b)(7)(B)(iv), is July 1, 2028. See section 82001(c)(3) of Pub. L. 119–21, set out as an
Effective Date
of 2025 Amendment note under section 1078 of this title.
Amendments
2025—Subsec. (a)(2). Pub. L. 119–21, § 82001(f)(1)(A), amended par. (2) generally. Prior to amendment, text read as follows: “The term ‘excepted consolidation loan’ means a consolidation loan under section 1078–3 of this title, or a Federal Direct Consolidation Loan, if the proceeds of such loan were used to the discharge the liability on an excepted PLUS loan.” Subsec. (a)(3). Pub. L. 119–21, § 82001(f)(1)(B), amended par. (3) generally. Prior to amendment, par. (3) defined “partial financial hardship” with respect to a borrower. Subsec. (b)(1). Pub. L. 119–21, § 82001(f)(1)(C)(i), amended par. (1) generally. Prior to amendment, par. (1) read as follows: “a borrower of any loan made, insured, or guaranteed under part B or D (other than an excepted PLUS loan or excepted consolidation loan) who has a partial financial hardship (whether or not the borrower’s loan has been submitted to a guaranty agency for default aversion or had been in default) may elect, during any period the borrower has the partial financial hardship, to have the borrower’s aggregate monthly payment for all such loans not exceed the result described in subsection (a)(3)(B) divided by 12;”. Subsec. (b)(6). Pub. L. 119–21, § 82001(f)(1)(C)(ii), added par. (6) and struck out former par. (6) which related to a borrower who no longer has a partial financial hardship or no longer wishes to continue the election under the income-based repayment program. Subsec. (b)(7)(B)(iv). Pub. L. 119–21, § 82001(f)(1)(C)(iii), inserted “(as such section was in effect on the day before the date of the repeal of section 1087e(e) of this title” after “section 1087e(d)(1)(D) of this title”. Subsec. (b)(8). Pub. L. 119–21, § 82001(f)(1)(C)(iv), inserted “or the Repayment Assistance Program under section 1087e(q) of this title” after “standard repayment plan”. Subsec. (c). Pub. L. 119–21, § 82001(f)(1)(D), amended subsec. (c) generally. Prior to amendment, subsec. (c) related to eligibility determinations for income-based repayment. Subsec. (e). Pub. L. 119–21, § 82001(f)(1)(E)(ii), inserted “and before
July 1, 2026” after “after
July 1, 2014” in introductory provisions. Pub. L. 119–21, § 82001(f)(1)(E)(i), inserted “and before
July 1, 2026” after “after
July 1, 2014” in heading. 2019—Subsec. (c)(1). Pub. L. 116–91, § 4(b)(1), designated first sentence of existing provisions as par. (1) and inserted heading. Subsec. (c)(2). Pub. L. 116–91, § 4(b)(2), (3), designated second sentence of existing provisions as par. (2) and inserted heading, substituted “The Secretary shall—” for “The Secretary shall”, inserted subpar. (A) designation before “consider,”, substituted “; and” for period at end of subpar. (A), and added subpar. (B). 2010—Subsec. (e). Pub. L. 111–152 added subsec. (e). 2008—Subsec. (b)(1). Pub. L. 110–315 substituted “or had been in default” for “or is already in default”. 2007—Subsec. (d). Pub. L. 110–153 added subsec. (d).
Statutory Notes and Related Subsidiaries
Effective Date
of 2025 Amendment Pub. L. 119–21, title VIII, § 82001(f)(2), July 4, 2025, 139 Stat. 347, provided that: “The
Amendments
made by this subsection [amending this section] shall take effect on the date of enactment of this title [July 4, 2025], and shall apply with respect to any borrower who is in repayment before, on, or after the date of enactment of this title.”
Effective Date
Section effective July 1, 2009, see section 203(c)(1) of Pub. L. 110–84, set out in an
Effective Date
of 2007 Amendment note under section 1078–3 of this title.
Reference
Citations & Metadata
Citation
20 U.S.C. § 1098e
Title 20 — Education
Last Updated
Apr 6, 2026
Release point: 119-73