Income-Based Student Loans

Income-based student loan repayment is a standard option with most loans from the federal government, and they can be a godsend when you need it and can qualify. On the other hand, private student loan lenders generally don’t offer this option, instead offering short-term help like forbearance. 

In our research, however, we found two private lenders who do offer income-based student loans. If you’re unable to get federal student loans or have already tapped them out and are worried about your post-graduation income, we’ll walk you through how these programs work.

Company	Loan amounts	LendEDU Rating
Dept. of Education	Varies based on loan type	Not rated
Edly	$5,000 – $15,000 / academic year; $20,000 lifetime max	3.9/5
A.M. Money	$3,750 – $50,000 or your full cost of attendance, whichever is less	3.2/5

Income-based student loans

If you meet the requirements, nearly all federal student loans are eligible for income-driven repayment plans—including the federal income-based repayment plan. If you’re looking at private student loans, however, here’s a quick overview of two options that may work for you:

Edly

Best for income-based repayment

3.9 _/5

View Rates

---

Why we picked it

Edly stands out for its income-based repayment options, making it an excellent choice for students who prefer flexible repayment plans tied to their income.

Edly’s eligibility criteria are accessible, requiring no cosigner and only a soft credit check for initial quotes, making it easier for students to explore their options without affecting their credit scores. 

Additionally, it serves U.S. citizens and permanent residents across 43 states, excluding only a few. This flexibility and accessibility make Edly an appealing option for students seeking manageable and adaptive loan repayment options.

Edly terms and eligibility information

Rates (APR)	Not disclosed
Citizenship	U.S. citizen or permanent resident
Student status requirement	Seniors and graduate students within 16 months of graduation
State eligibility	May attend school or reside in 43 states (except Colorado, Connecticut, Iowa, Maine, Nebraska, Vermont and West Virginia)
Enrollment requirements	Enrolled at least half-time in a degree program
Minimum GPA	Must meet your school’s guidelines for satisfactory academic progress
Credit check	Soft credit check for quotes; hard credit pull if applying for funding
Grace period	3 months
Cosigner requirement	None

A.M. Money

3.2 _/5

View Rates

---

Why we picked it

Chicago-area upperclassmen who qualify for Pell grants (or are “near Pell-eligible”) can apply for these loans. Payments are calculated at 15% of your discretionary income, with a minimum possible payment of $50. 

It’s available to students with stellar academic qualifications, which A.M. Money uses in lieu of an actual credit score. Plus, there is no need for a cosigner, making it available to more people.

A.M. Money terms and eligibility information

Rates (APR)	8.34% – 8.87%
Citizenship	U.S. citizen or permanent resident
Student status requirement	Juniors and seniors, but some sophomores may qualify.
State eligibility	Illinois
Enrollment requirements	Must attend at least half-time at one of 22 different schools in the Chicago area and study in an eligible major.
Minimum GPA	“Above-average” GPA
Credit check	Not disclosed
Grace period	6 months
Cosigner requirement	None

How do income-based repayment student loans work?

Income-based student loans work by scaling your monthly payments to match your available income. (This is opposed to “outcomes-based” student loans offered by private lenders, like Ascent, that allow you to qualify based on your future earning potential, although your payments stay the same.)

The details of how lenders scale those payments vary depending on whether you’re talking about private or federal student loans. Often, the details overlap between the two, but that’s not always the case, as we’ll see.

Income-based repayment for private loans

Edly and A.M. Money are the only two lenders we could find offering private income-based student loans, and these two options work very differently. 

A.M. Money income-based student loans

A.M. Money works more like a traditional student loan. You’ll begin with a 10-year term length with fixed interest rates. Those payments will stay the same regardless of income unless you apply for income-based repayment.

A.M. Money only offers the income-based repayment option if you qualify, meaning your payments will be lower using its formula (15% of your discretionary income). If not, you’ll keep paying normal, non-income-based payments until the loan is paid off. 

In addition, A.M. Money only allows you to make payments under an income-based repayment plan for 36 months. The plan does not last for the life of the loan. 

Edly income-based student loans

Edly, on the other hand, operates more like an income-share agreement. Borrowers begin making payments under an income-based repayment plan rather than it serving as a backup option. You won’t make any payments if your income is below $30,000. 

Under Edly’s terms, you’ll continue paying 7% of your monthly income until one of three thresholds is reached: 

• You’ve made 84 total payments.
• You’ve paid off 2.5X your original loan amount.
• You’ve paid enough to reach an effective APR of up to 25.96%

The only difference between Edly and an income-share loan agreement is that Edly may offer forbearance in limited cases, while income-share agreements generally do not. 

How do income-based private student loans differ from income-share agreements?

There’s not much difference between an Edly-style income-based student loan and a true income-share agreement. Both rely on you paying a share of your income for a set period, which may be far more than you’ll pay back with a regular interest-driven loan.

In fact, the Consumer Financial Protection Bureau recently cracked down on the income-sharing industry because it has been deceptive in luring students in without a full understanding of how they work and their actual costs.  

Expert take: ISAs vs. student loans

Eric Kirste

CFP®

The biggest difference between an ISA and a student loan is that an ISA has a minimum income threshold that students need to attain after graduation before making payments. Second, an ISA does not charge traditional interest like a traditional student loan. ISAs can be an option to cover some funding gaps if you have already exhausted other aid. However, ISAs have risks, including confusing terms, unpredictable repayment terms, limited availability, and the chance that you’ll end up paying back more than you borrowed. There is some guidance in the marketplace that says to avoid ISAs with terms longer than 10 years.

Income-based repayment for federal loans

Federal student loans generally start with a 10-year default repayment plan, more akin to what A.M. Money offers. If your income isn’t enough to comfortably afford your monthly payments, you can apply to join an income-driven repayment plan, one of which is (confusingly enough) called “income-based repayment,” or IBR.

Under an IBR plan, you’ll pay 10% to 15% of your discretionary income for 20 to 25 years, after which the remaining balance will be forgiven. 

Pros and cons of income-based student loans

Pros

• No credit needed

  Although Edly and A.M. Money may pull your credit, no minimum credit score requirements exist. It’s less important since eligibility is based more on your academic record.

• Cosigner not needed

  Edly accepts cosigners if you want to use one, but it’s not required. And A.M. Money doesn’t even accept cosigners at all.

• Payments scale to available income

  A.M. Money uses a similar formula to the federal government in calculating your monthly payments as 15% of your discretionary income. Edly may require you to pay about 7% of your gross income, but you won’t until your income exceeds $30,000 annually.

Cons

• Low borrowing limits

  You can borrow a maximum of $50,000 per year with A.M. Money. Edly has a lifetime cap of just $20,000.

• No student loan forgiveness

  Unlike federal loans, private income-based loans aren’t forgiven after a period of time.

• Shifting regulatory landscape

  Federal agencies and watchdog groups have been cracking down on lenders offering income-share agreements virtually identical to Edly’s loans, saying they’re using deceptive practices and predatory terms.

• Higher interest rates and fees

  A.M. Money charges an origination fee of 4.5%, while Edly’s is 4.0%. In addition, both charge higher rates than federal student loans and Edly’s upper rate rivals most credit cards.

• Limits to income-based payments

  Edly doesn’t give you a choice in repayment plan options like federal loans; you’re shunted straight to income-based repayments. On the other hand, A.M. Money only allows borrowers to make income-based payments for a maximum of 36 months.

• Largely unavailable to most people

  A.M. Money is only available to a specific group attending school in one tiny area of the country. Edly is more widely open, but still not offered in CO, CT, IA, NE, ME, VT, and WV.

Is an income-based student loan right for me?

While student loans have their problems—especially private student loans—most students will be better off with a more traditional federal or private student loan than Edly. (And most students aren’t eligible with A.M. Money since most students don’t attend school in Chicago.) 

A private income-based student loan could be a good option if the following scenarios ring true to you, however:

• You only need a little funding to cover the remaining funding gaps.
• You don’t plan on earning an above-average income.
• You think you’ll likely take time off after graduating or move into a lower-earning job.
• You fully understand the terms of the contract and your potential costs under different scenarios.
• You’ve already used up other funding options like grants, scholarships, and federal student loans. 

Alternatives to income-based student loans

Scholarships and grants

Scholarships and grants provide funding that does not need to be repaid, making them a valuable student resource. They are typically awarded based on merit, financial need, or specific criteria like field of study, extracurricular involvement, or demographic factors.

Federal work-study

Federal work-study offers part-time employment opportunities to eligible students, allowing them to earn money to pay for education expenses. It is designed to provide work experience related to the student’s course of study whenever possible, helping to reduce the need for loans.

Savings plans

Savings plans, such as 529 plans, are investment accounts designed to encourage saving for future education expenses. These plans offer tax advantages and can be used to pay tuition, fees, and other education-related costs, reducing reliance on student loans.

Employer assistance

Some employers offer tuition assistance programs to benefit their employees. This support can come in the form of direct payment for courses, reimbursement for tuition costs, or scholarships for employees or their dependents, helping to lessen the burden of student loan debt.

How we selected the best income-based student loans

LendEDU evaluates student loan lenders to help readers find the best student loans. Our latest analysis reviewed 725 data points from 25 lenders and financial institutions, with 29 data points collected. This information is gathered from company websites, online applications, public disclosures, customer reviews, and direct communication with company representatives.

These star ratings help us determine which companies are best for different situations. We don’t believe two companies can be the best for the same purpose, so we only show each best-for designation once.

Recap of the best income-based repayment student loans