For years, income-driven repayment has been a dividing line between federal and private student loans. Federal borrowers could tie monthly payments to income but historically, private borrowers could not.

That line is starting to blur.

RISLA (Rhode Island Student Loan Authority), a nonprofit student loan lender based in Rhode Island, has introduced an income-based repayment (IBR) option for borrowers who refinance student loans through the organization. The plan borrows heavily from the "old" IBR framework created in 2009, offering payment flexibility during periods of lower income and forgiveness after decades of repayment.

It is a small but notable shift in a private lending market that has traditionally emphasized fixed monthly payments and faster payoff 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 RISLA's Income Based Repayment Works

Under RISLA’s IBR program, borrowers who refinance their student loans can cap their monthly payment at 15% of discretionary income. That payment will never exceed what the borrower would owe under a 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 does not capitalize (meaning it does not get added to the loan balance) until the borrower reaches the end of the IBR repayment period.

Borrowers who remain in the program for 25 years of qualifying payments can receive forgiveness on any remaining balance. Periods of forbearance or deferment do not count toward that total unless the borrower is actively making IBR payments.

RISLA also says borrowers who enroll in IBR remain eligible for its profession-based loan forgiveness programs, including Nursing Rewards and Internship Forgiveness. That combination is unusual in the private market, as most other private lenders don't offer "forgiveness" programs.

Why Private Lenders Are Experimenting Now

Private lenders have long avoided income-based repayment because of its uncertainty. Fixed payments make loans easier to price, easier to securitize, and easier to explain to investors.

But the student loan market has changed. Rising balances, uneven wage growth, and the normalization of income-driven repayment in the federal system have reshaped borrower expectations. Many borrowers now see payment flexibility as a baseline feature, 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 income dip may be less likely to default altogether. Lower default rates can offset the cost of longer repayment periods and potential forgiveness.

RISLA’s nonprofit status may also make the math easier. The organization does not answer to shareholders in the same way large for-profit lenders do, giving it more room to prioritize borrower stability over short-term returns.

What Does The Math Look Like?

Income-based repayment lowers monthly payments, but it almost always raises the total amount paid over time. Time is a huge factor in student loan repayment.

Consider a simplified example:

• Loan balance: $60,000
• Interest rate: 6%
• Borrower discretionary income: $50,000

Standard repayment (15 years):
A borrower on a 15-year fixed plan would pay roughly $505 per month. Over 15 years, total payments would come to about $91,000, with the loan paid off in full. Shorter repayment plans repay even less due to less interest accruing.

Income-based repayment (25 years):
At 15% of discretionary income, the monthly payment would be about $343 per month initially, but payments could rise over time (in fact, the lender is betting on it). Over 25 years, the borrower could easily pay $100,000 in total, depending on income growth, before any remaining balance is forgiven.

It's also important to realize that forgiven balances are taxable - and would be subject to the student loan tax bomb.

The borrower does benefit from flexibility and protection against unaffordable payments. The lender benefits from extended interest collection and lower default risk. The tradeoff is time.

What This Means For Borrowers

For borrowers with volatile incomes (early-career professionals, gig workers, or those entering lower-paying public service roles) private IBR could reduce financial strain without forcing them back into the federal system.

However, those with volatile incomes may find it difficult to be approved for a refinance into an IBR program. There are multiple student loan refinance lenders, and they all have different underwriting criteria. if there's repayment risk, they may not offer IBR anyway.

Refinancing into a private student loan with this IBR plan also means giving up federal protections such as Public Service Loan Forgiveness and any future federally mandated payment pauses.

It is too early to call this a trend, but RISLA’s move will be closely watched. If default rates fall and borrower satisfaction rises, other lenders may test similar options, possibly with stricter eligibility rules or higher interest rates to offset the risk.

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