- The nonprofit lender, the Rhode Island Student Loan Authority (RISLA), offers income-based repayment for refinanced private student loans, a structure long limited to federal loans.
- The plan reverses the “old” IBR formula: maximum payments at 15% of discretionary income, with relief after 25 years.
- This approach may reduce the risk of default for lenders, but it can raise total borrowing costs for consumers over time.
For many years, income-based repayment has served as a dividing line between federal and private student loans. Federal borrowers can tie monthly payments to income, but historically, private borrowers have not been able to.
This line is starting to blur.
RISLA (Rhode Island Student Loan Authority), a non-profit student loan lender based in Rhode Island Introducing the Income Based Repayment (IBR) option to borrowers Who refinance student loans through the organization. The plan borrows heavily from the “old” IBR framework created in 2009, providing payment flexibility during periods of low income and relief after decades of repayment.
It’s a small but noticeable shift in a private lending market that has traditionally focused on fixed monthly payments and faster repayment schedules. As federal student loan policies continue to change, the question is whether other lenders will follow and whether borrowers should welcome them if they do.
How income-based repayment works at RISLA
Under RISLA’s IBR program, borrowers who refinance their student loans can cap their monthly payments at 15% of discretionary income. This payment will never exceed what the borrower would owe under the standard repayment plan, and the minimum payment is $10 per month.
Interest continues to accrue during IBR periods, but there is an important guardrail: Unpaid interest is not capitalized (meaning it is not added to the loan balance) until the borrower reaches the end of the IBR period.
Borrowers who stay in the program for 25 years of qualifying payments can get any remaining balance forgiven. Forbearances or deferrals do not count toward this total unless the borrower is actively making IBR payments.
RISLA also says borrowers who enroll in IBR remain eligible for occupation-based loan forgiveness programs, including nursing bonuses and in-house forgiveness. This combination is unusual in the private market, as most other private lenders do not offer “forbearance” programs.
Why private lenders are experimenting now
Private lenders have long avoided income-based repayment because of uncertainty. Fixed payments make loans easier to price, securitize, and easier to explain to investors.
But the student loan market has changed. Rising balances, uneven wage growth, and the normalization of income-based repayment in the federal system have reshaped borrowers’ expectations. Many borrowers now view payment flexibility as an essential benefit, not a luxury.
From a lender’s perspective, IBR can serve as a risk management tool. A borrower who can reduce payments during a job loss or reduced income may be less likely to default entirely. Lower default rates can offset the cost of longer payment terms and potential forgiveness.
RISLA’s nonprofit status may also make calculations easier. The organization does not respond to shareholders in the same way as large, for-profit lenders, which gives it more leeway to prioritize borrower stability over short-term returns.
What does the math look like?
Income-based repayment lowers the monthly payments, but always raises the total amount paid over time. Time is a big factor in student loan repayment.
Consider a simplified example:
- Loan balance: $60,000
- interest rate: 6%
- Estimated income of the borrower: $50,000
Standard repayment (15 years):
A borrower with a 15-year fixed plan would pay approximately $505 per month. Over 15 years, payments would total about $91,000, with the loan paid off in full. Shorter repayment plans pay back less because of the lower interest accrued.
Income-based repayment (25 years):
At 15% of discretionary income, the monthly payment would be about $343 per month at first, but payments could rise over time (in fact, the lender is betting on it). Over 25 years, a borrower could easily pay a total of $100,000, depending on income growth, before any remaining balance is forgiven.
It’s also important to realize that forgiven balances are taxable — and will be subject to the student loan tax bomb.
The borrower benefits from flexibility and protection from unaffordable payments. The lender benefits from expanded interest collection and a lower risk of default. The trade-off is time.
What does this mean for borrowers?
For borrowers with fluctuating incomes (early-career professionals, gig workers, or those engaged in low-paying public service roles), a private IBR can reduce financial stress without forcing them back into the federal system.
However, those with fluctuating incomes may find it difficult to get approved to refinance in the IBR program. There are many student loan refinancing lenders, each with different underwriting standards. If there is a risk of repayment, they may not offer IBR anyway.
Refinancing into a private student loan with this IBR plan also means giving up federal protections like Public Service Loan Forgiveness and any future payment pauses.
It’s too early to call this a trend, but RISLA’s move will be closely watched. If delinquency rates decline and borrower satisfaction rises, other lenders may experiment with similar options, perhaps with stricter eligibility rules or higher interest rates to offset the risk.
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