§ 1098e. Income-based repayment
(a)
Definitions
In this section:
(1)
Excepted PLUS loan
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)
Excepted consolidation loan
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.
(3)
Partial financial hardship
The term “partial financial hardship”, when used with respect to a borrower, means that for such borrower—
(A)
the annual amount due on the total amount of loans made, insured, or guaranteed under part B or C (other than an excepted PLUS loan or excepted consolidation loan) to a borrower as calculated under the standard repayment plan under section
1078
(b)(9)(A)(i) or
1087e
(d)(1)(A) of this title, based on a 10-year repayment period; exceeds
(b)
Income-based repayment program authorized
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 C (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;
(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
(6)
if the borrower no longer has a partial financial hardship or 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 C (other than an excepted PLUS loan or excepted consolidation loan) shall not exceed 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; and
(7)
the Secretary shall repay or cancel any outstanding balance of principal and interest due on all loans made under part B or C (other than a loan under section
1078–2 of this title or a Federal Direct PLUS Loan) to a borrower who—
(B)
for a period of time prescribed by the Secretary, not to exceed 25 years, meets 1 or more of the following requirements—
(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;
(8)
a borrower who is repaying a loan made under part B or C 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; 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)
Eligibility determinations
The Secretary shall establish procedures for annually determining the borrower’s eligibility for income-based repayment, including 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 C (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 or in connection with income sensitive repayment schedules under section
1078
(b)(9)(A)(iii) or
1078–3
(b)(1)(E) of this title.
(d)
Special rule for married borrowers filing separately
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.