How Income-Driven Repayment Plans Work
Income-driven repayment (IDR) plans are designed to make federal student loan payments more affordable by capping your monthly payment at a percentage of your discretionary income. Your payment can change as your income or family size changes, and you must provide updated information each year to stay enrolled.
Most federal student loans are eligible for at least one income-driven repayment plan, but the specific plan you qualify for and your payment amount will depend on factors such as when you borrowed, your loan type, and your income and family size.
- Payments are based on income and family size, not the total amount you owe.
- Plans available: Saving on a Valuable Education (SAVE), Pay As You Earn (PAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR).
- Any remaining balance may be forgiven after 20 or 25 years of qualifying payments, depending on the plan.
- You must reapply or recertify your income and family size each year to remain on an IDR plan.
Sources: Consumer Financial Protection Bureau
IDR plans: SAVE, PAYE, IBR, ICR
There are four main income-driven repayment plans for federal student loans. Each has its own payment formula, forgiveness timeline, and eligibility criteria.
The SAVE Plan is the newest income-driven repayment plan and replaced the Revised Pay As You Earn (REPAYE) Plan in 2023. Borrowers who were on REPAYE automatically receive the benefits of the new SAVE Plan. Under SAVE, if you make your full monthly payment but it is not enough to cover the interest that accrued that month, the government covers the remaining interest, preventing your balance from growing due to unpaid interest.
PAYE is available to borrowers who meet certain loan origination dates. Under PAYE, your monthly payment is capped at 10% of discretionary income, and any remaining balance is forgiven after 20 years of qualifying payments.
IBR sets your payment at 10% or 15% of discretionary income, depending on when you took out your loans. Your payment never exceeds the standard 10-year repayment amount, and forgiveness comes after 20 or 25 years.
ICR is the only income-driven plan available to Parent PLUS borrowers, but they must first consolidate those loans into a Direct Consolidation Loan. ICR payments are the lesser of 20% of discretionary income or the amount you would pay on a fixed 12-year plan adjusted by income, with forgiveness after 25 years.
| Plan | Payment formula | Forgiveness timeline | Other key features |
|---|---|---|---|
| PAYE | 10% of discretionary income | 20 years | Qualifies for Public Service Loan Forgiveness |
| SAVE | Based on income and family size; exact percentage not specified in the cited sources | Generally 20–25 years; shorter for smaller loan balances | Interest subsidy; qualifies for PSLF |
| IBR | 10% or 15% of discretionary income, but never more than the 10-year Standard plan | 20 or 25 years | Payment cap at 10-year Standard amount |
| ICR | Lesser of 20% of discretionary income or a fixed 12-year plan adjusted by income | 25 years | Only IDR plan for Parent PLUS loans after consolidation |
Sources: Consumer Financial Protection Bureau
Payment Calculation Formulas and Eligibility
The exact formula for calculating discretionary income and your monthly payment depends on the plan. The Consumer Financial Protection Bureau provides details about payment calculations for several plans, though the percentage for the SAVE Plan is not detailed in these sources.
For PAYE, your payment is 10% of discretionary income. Eligible borrowers must have taken out their first federal student loan after October 1, 2007, and must have received a Direct Loan or Direct Consolidation Loan after October 1, 2011.
For IBR, your payment is the lesser of 10% or 15% of discretionary income (depending on when the loan was taken out) or what you would pay under the 10-year Standard Repayment Plan. New borrowers on or after July 1, 2014, who had no existing federal student loan debt at that time qualify for the 10% rate; all other IBR borrowers pay 15%.
For ICR, your payment is the lesser of 20% of discretionary income or what you would pay on a fixed repayment plan over 12 years, adjusted by income.
For the SAVE Plan, the payment percentage is not specified in the Consumer Financial Protection Bureau sources provided. Because the exact formula can vary by your circ*mstances, use the U.S. Department of Education's official Loan Simulator to get a personalized estimate based on your income and family size.
Sources: Consumer Financial Protection Bureau
Forgiveness Timelines and Public Service Loan Forgiveness
All income-driven repayment plans offer forgiveness after a set number of years of qualifying payments. The forgiveness period depends on the plan and, in some cases, your loan balance and whether the loans were for undergraduate or graduate study.
Generally, under IBR you can receive forgiveness after 20 or 25 years of qualifying payments, depending on when you borrowed and your loan type. Under PAYE, the forgiveness period is 20 years. Under ICR, it is 25 years.
The SAVE Plan provides a more nuanced timeline. For borrowers with original principal balances of $12,000 or less, forgiveness can occur after only 10 years of qualifying payments. For each additional $1,000 borrowed above $12,000, the repayment term increases by one year. The maximum repayment term under SAVE is 20 years for borrowers with only undergraduate loans, and 25 years for any borrowers who have graduate school loans.
If you work in public service, you may qualify for Public Service Loan Forgiveness (PSLF) and receive forgiveness after 120 qualifying payments—potentially as few as 10 years. Both PAYE and SAVE are qualifying repayment plans for PSLF, as are other income-driven repayment plans.
- PAYE: forgiveness after 20 years.
- IBR: forgiveness after 20 or 25 years.
- ICR: forgiveness after 25 years.
- SAVE: forgiveness after 10–25 years depending on original principal balance and loan type.
- PSLF: forgiveness after 10 years of qualifying public service employment.
Sources: Consumer Financial Protection Bureau
How to enroll
If you are interested in income-driven repayment, you can likely apply online through the U.S. Department of Education's IDR plan enrollment website. This site lets you apply for an IDR plan and may allow you to compare your expected payment options.
If you are already on an income-driven plan, you must update your income and family size each year to keep your payment amount accurate. The recertification process is an important part of staying enrolled.
If your loans are not Direct Loans, you may need to consolidate them before you can enroll in an IDR plan. For Parent PLUS loans, you must first consolidate the loans into a Direct Consolidation Loan. Your loan servicer can provide additional guidance about whether consolidation is needed and how to complete the process.
Sources: Consumer Financial Protection Bureau
Frequently asked questions
What is the difference between the SAVE plan and the old REPAYE plan?
The SAVE Plan is the newest income-driven repayment plan and replaced the REPAYE Plan in 2023. Borrowers who were on REPAYE automatically get the benefits of the new SAVE Plan. One key difference is that under SAVE, if you make your full monthly payment but it does not cover the interest that accrues that month, the government covers the remaining interest, so your balance does not grow from unpaid interest.
Sources: Consumer Financial Protection BureauCan I qualify for income-driven repayment if I have private loans?
Income-driven repayment plans are available for federal student loans. For private student loans, eligibility is determined by the lender, and they are not part of the federal income-driven repayment programs. Check with your private loan servicer for repayment options.
What happens if my income fluctuates?
Your monthly payment under an income-driven repayment plan is recalculated based on your income and family size, which you must update each year. If your income changes significantly, you can recertify before the annual deadline to have your payment adjusted sooner.
Sources: Consumer Financial Protection BureauWill my monthly payment be zero if my income is below the poverty line?
If your income is low enough, it is possible that your calculated payment will be zero, because income-driven repayment plans are based on discretionary income, which is what remains after a certain portion of the federal poverty guideline is subtracted. The exact formula varies by plan.
Sources: Consumer Financial Protection BureauHow long does it take to get forgiveness under an IDR plan?
Forgiveness generally comes after 20 or 25 years of qualifying payments, depending on the plan and when you borrowed. Under the SAVE Plan, the timeline can be as short as 10 years if your original principal balance was $12,000 or less, and it increases by one year for each additional $1,000 above that amount. For SAVE, the maximum term is 20 years if you have only undergraduate loans, and 25 years if you have any graduate school loans. For ICR, it is 25 years; for PAYE, it is 20 years; and for IBR, it is either 20 or 25 years depending on your loan type.
Sources: Consumer Financial Protection BureauSources
- Student loan answers | Consumer Financial Protection Bureau — Consumer Financial Protection Bureau
- What are income-driven repayment (IDR) plans, and how do I qualify? | Consumer Financial Protection Bureau — Consumer Financial Protection Bureau
- How long does it take to pay off a student loan? | Consumer Financial Protection Bureau — Consumer Financial Protection Bureau