Financial Aid: Help Is on the Way

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The first fix to the program applies to married couples. Previously, a lender for the IBR program would look at a married person's student loan debt and use the couple's joint income to calculate what the monthly payments should be for the program. The program did not take into account that the IBR participant's spouse could have federal student debt as well. The result: married couples were charged up to twice as much as two single borrowers in the same situation, says Irons. That glitch has since been fixed, and now the IBR program will take both spouses' federal loan debt, as well as their total income, into account when calculating their monthly payments, Irons says. For example, if both spouses have federal loans and file a joint federal tax return, the calculated IBR payment amount for each borrower will be adjusted based on each borrower's percentage of the couple's total eligible loan debt. The end result: The couple will pay less. "This is better for married borrowers, because it is not fair to assume that a joint income is totally available for one's debt," Irons says. This change will go into effect automatically for new IBR users who apply for the program this year. It will not happen automatically, however, for couples who already use IBR and file jointly. Borrowers in that situation should contact their lender this summer and make certain that their IBR payment is adjusted to reflect the change, says Irons.

Another update to IBR this July will expand eligibility for the program. Previously, a lender calculated whether borrowers were eligible for the IBR program based on the original, or baseline, amount of debt the borrowers first owed when they entered the repayment period on their loan. Many borrowers' original loan balances increase, however, because of accrued interest during periods of loan deferment or forbearance. For example, a person who owed $40,000 in loans when she first graduated could easily owe $50,000 a few years later if she deferred payment of her loan for a few years, says Irons. Under the new guidelines, eligibility for the IBR program will now be calculated based either on the original balance of the loan when the borrower first entered repayment or on the current loan amount, whichever is larger. For the first time, borrowers will be able to qualify for the program based on what they actually owe, says Irons. "These changes are going to make more people eligible for IBR and make the program more fair and accessible," Irons says.

Damast is a reporter for Businessweek.com.

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