Income-driven repayment (IDR) plans tie your federal student loan payments to your income and family size. For many borrowers, they're a lifeline—and potentially a path to loan forgiveness.
How IDR Plans Work
All IDR plans share these features:
- Payments based on discretionary income
- Remaining balance forgiven after 20-25 years
- Annual income recertification required
- Available for most federal loans
Discretionary income = Your adjusted minus 150% (or 225% for SAVE) of the poverty guideline for your family size and state.
Pro Tip
If your calculated payment is $0 under an IDR plan, that still counts as a qualifying payment toward forgiveness. You're making "progress" even when paying nothing.
The Four IDR Plans
SAVE (Saving on a Valuable Education)
The newest and often most generous plan
- Payment: 10% of discretionary income (5% for undergrad-only loans)
- Discretionary income threshold: 225% of poverty line
- Forgiveness: 20 years (undergrad) or 25 years (grad)
- Interest benefit: Government covers unpaid interest
Best for: Most borrowers, especially those with lower incomes relative to debt
PAYE (Pay As You Earn)
- Payment: 10% of discretionary income
- Discretionary income threshold: 150% of poverty line
- Forgiveness: 20 years
- Must have been a new borrower after Oct 2007 and received loans after Oct 2011
Best for: Borrowers who qualify and want 20-year forgiveness
IBR (Income-Based Repayment)
- Payment: 10% or 15% of discretionary income (depending on when you borrowed)
- Discretionary income threshold: 150% of poverty line
- Forgiveness: 20 or 25 years (depending on when you borrowed)
Best for: Borrowers who don't qualify for PAYE or SAVE
ICR (Income-Contingent Repayment)
- Payment: 20% of discretionary income or fixed 12-year payment (whichever is less)
- Forgiveness: 25 years
- The only IDR plan for Parent PLUS loans (through consolidation)
Best for: Parent PLUS borrowers who consolidate
Comparing the Plans
| Plan | Payment % | Forgiveness | Special Notes |
|---|---|---|---|
| SAVE | 5-10% | 20-25 years | Most generous, interest benefit |
| PAYE | 10% | 20 years | Must qualify, capped at standard payment |
| IBR | 10-15% | 20-25 years | Widely available |
| ICR | 20% | 25 years | Only option for Parent PLUS |
Maria had $80,000 in loans and a $45,000 salary. Under the standard plan, she'd pay $920/month. Under SAVE, her payment was $186/month. The lower payment freed up money for an emergency fund and retirement savings.
Calculating Your Payment
SAVE Plan Example:
- Start with AGI (Adjusted Gross Income): $50,000
- Subtract 225% of poverty guideline (~$33,975 for single person): $50,000 - $33,975 = $16,025
- Multiply by 10%: $16,025 × 10% = $1,603/year
- Monthly payment: $133
Compare to standard 10-year payment on $60,000 loans at 6%: $666/month
The Forgiveness Benefit
After 20-25 years of qualifying payments, remaining balance is forgiven:
Example:
- $80,000 in loans at 6%
- SAVE payment of $200/month
- After 20 years: $48,000 paid
- Remaining ~$60,000 forgiven (interest accrued)
Watch Out
IDR forgiveness is currently treated as taxable income. A $60,000 forgiven balance could mean a $15,000+ tax bill. The ARPA made forgiveness tax-free through 2025, but future tax treatment is uncertain.
Annual Recertification
You MUST recertify your income and family size annually:
- Servicer will notify you when it's time
- Miss the deadline and payments jump to standard amount
- Can recertify early if income drops significantly
Do This
Set a calendar reminder 2-3 months before your recertification deadline. Some servicers let you recertify early if your income decreases.
Marriage and IDR
Getting married affects your payments:
If you file taxes jointly: Both incomes are counted, potentially raising your payment.
If you file separately: Only your income counts, but you lose tax benefits (can't deduct student loan interest, lose education credits, etc.).
Analysis needed: Calculate IDR payments both ways and compare to tax implications.
IDR and PSLF
Income-driven repayment is essential for Public Service Loan Forgiveness:
- Must be on an IDR plan (or standard 10-year)
- IDR maximizes forgiveness amount
- Lower payments = more debt forgiven at 10 years
- PSLF forgiveness is tax-free
Pro Tip
If pursuing PSLF, use the IDR plan with the lowest payment. You want to minimize what you pay before the 10-year forgiveness.
When IDR Doesn't Make Sense
IDR isn't always the best choice:
Consider other options if:
- You can afford standard payments comfortably
- Your debt-to-income ratio ratio is low
- You won't qualify for forgiveness
- You want to be debt-free faster
- The 20-25 year forgiveness tax bomb concerns you
Run the numbers: Calculate total paid under IDR vs. aggressive payoff vs. refinancing.
Common IDR Mistakes
Avoid This
- Not applying when eligible - Many struggle with payments unnecessarily
- Missing recertification - Causes payments to spike
- Not choosing the right plan - SAVE is often best now
- Ignoring tax implications - Forgiven amounts may be taxable
- Forgetting about PSLF - If you work in public service, different strategy
- Not updating after income changes - Can recertify early if income drops
How to Enroll
Step 1: Log into studentaid.gov
Step 2: Complete the IDR application
- Provide income information (or consent to IRS data retrieval)
- Select your preferred plan
- Apply for all eligible loans
Step 3: Continue making payments until approved
Step 4: Set reminder for annual recertification
The SAVE Plan's Special Benefits
The SAVE plan (which replaced REPAYE in 2023-2024) offers unique advantages:
Interest benefit: If your payment doesn't cover monthly interest, the government covers the rest. Your balance won't grow.
Lower payments: Uses 225% of poverty line (vs. 150% for other plans), reducing calculated payment.
Undergrad discount: Only 5% of discretionary income for undergrad-only loans (vs. 10% for grad).
Quick Win
If you're on an older IDR plan, use the studentaid.gov calculator to compare your current payment to what you'd pay under SAVE. Many borrowers can lower their payments by switching.
Loan Consolidation and IDR
Direct Consolidation can make loans eligible for IDR:
- Combines multiple federal loans into one
- FFEL and Perkins loans become Direct Loans
- Parent PLUS becomes eligible for ICR
Caution: Consolidation may restart your forgiveness clock. Consult studentaid.gov or a financial advisor before consolidating if you've been making qualifying payments.