What are income-driven repayment (IDR) plans, and how do I qualify?

If you have a federal student loan, you may be able to enroll in an income-driven repayment (IDR) plan online. If you have older federal loans, you may have to contact your loan servicer directly to enroll. The U.S. Department of Education's online IDR plan enrollment website will tell you what types of loans you have.

Saving on a Valuable Education (SAVE) Plan

Saving on a Valuable Education (SAVE) Plan is the newest income-driven repayment (IDR) plan available for all Direct Loans. It replaced the Revised Pay As You Earn (REPAYE) Plan in 2023. Borrowers on the REPAYE Plan automatically get the benefits of the new SAVE Plan.

The SAVE Plan lowers payments for almost all people compared to other IDR plans because your payments are based on a smaller portion of your income. SAVE also caps payments at a percentage of your discretionary income and is a repayment plan that qualifies for Public Service Loan Forgiveness after a certain number of years, depending on whether you borrowed for undergraduate or graduate study. Learn more at the Department of Education’s SAVE Plan page .

Additionally, the SAVE Plan has an interest benefit. If you make your full monthly payment, but it is not enough to cover the accrued monthly interest, the government covers the rest of the interest that accrued that month. This means that the SAVE Plan prevents your balance from growing due to unpaid interest.

Pay As You Earn (PAYE) Plan

Pay As You Earn (PAYE) is a federal student loan repayment plan available to some borrowers with newer federal loans. For borrowers who qualify for PAYE, monthly loan payments are capped at 10 percent of your discretionary income. Additionally, after 20 years of monthly payments, any remaining student loan balance is forgiven. PAYE is also an eligible repayment plan for borrowers seeking to qualify for Public Service Loan Forgiveness.

In order to qualify for PAYE, you need to have borrowed your first federal student loan after October 1, 2007, and you need to have borrowed a Direct Loan or a Direct Consolidation Loan after October 1, 2011. To determine whether you qualify for PAYE, check out the Department of Education’s Loan Simulator .

Income-Based Repayment (IBR)

Another repayment program, Income-Based Repayment (IBR), caps your payment amount at the lower of a certain percentage of your discretionary income or the amount you would pay under the 10-year Standard Repayment Plan. The percentage rate depends on when you took out the loan and if you had existing federal student loans.

The percentage of your discretionary income will be 10 percent:

• If you borrowed on or after July 1, 2014; and
• You are a new borrower or had no outstanding balances on a federal student loan when you received the new loan.

The percentage of your discretionary income will be 15 percent:

• If you borrowed your first loan before July 1, 2014.

You get a lower payment with IBR if your federal student loan debt is high relative to your income and family size. While your loan servicer will perform the calculation to determine your eligibility, you can use the U.S. Department of Education's Loan Simulator to estimate whether you would likely benefit from an IBR plan.

If you have a subsidized loan and your monthly IBR payment is less than the interest that accrues each month, the government will pay the difference for the first three years so that your overall balance doesn’t increase. Any remaining loan balances are forgiven after you make payments for 20 or 25 years .

Many borrowers with federal student loans can enroll in IBR online . Your monthly payment adjusts every year based on your income and family size. You must submit documentation to your servicer each year to remain in the IBR program.

Income Contingent Repayment (ICR) plan

The final income-driven repayment plan, the income contingent repayment plan caps your monthly payment at the lesser of 20 percent of your discretionary income or what you would pay on a fixed repayment plan over the course of 12 years, adjusted according to your income. Any remaining loan balances are forgiven, after you make payments for 25 years .

Any borrower with an eligible federal student loan can make payments under the ICR plan. This plan is the only income-driven repayment option for Parent PLUS loan borrowers. Although Parent PLUS loans cannot be repaid under any income-driven repayment plans, parent borrowers may consolidate their Direct PLUS loans or Federal PLUS loans into a Direct Consolidation loan, which does qualify for the ICR plan.

Here are some ideas for making the most of income-driven repayment.