An Income-Driven Repayment Plan Could Save You Money

Financial AidLoan Repayment11 minutes

Are you struggling with your federal student loan payments? If your monthly payments are too high compared with your income, you might be able to switch to a different repayment plan. On an income-driven repayment (IDR) plan, your monthly payment is based on your income and family size. Applying is free.

Plus, payments you make on an IDR plan can count toward Public Service Loan Forgiveness (PSLF) if you meet the other requirements for PSLF.

You can estimate your monthly payments under different repayment plans using Loan Simulator.

What income-driven repayment (IDR) plans are available?

There are four different IDR plans.

  • Income-Based Repayment (IBR) Plan
  • Pay As You Earn Repayment Plan (PAYE)
  • Revised Pay As You Earn (REPAYE) Plan
  • Income-Contingent Repayment Plan (ICR)

The following table compares the maximum monthly payment amounts and repayment periods under each plan. After you complete the repayment period for each IDR plan, your remaining balance is forgiven.

Repayment PlanMonthly Payment AmountRepayment Period
Income-Based (IBR)15% of discretionary income. (10% for new borrowers)

The payment will never be more than the amount you would pay under the 10-year Standard Repayment Plan.
25 years (20 years for new borrowers).
Pay As You Earn (PAYE)10% of discretionary income

The payment will never be more than the amount you would pay under the 10-year Standard Repayment Plan.
20 years
Revised Pay As You Earn (REPAYE)10% of discretionary income20 years if all loans being repaid on the plan were received for undergraduate study

25 years if any loans being repaid under the plan were received for graduate or professional study
Income-Contingent (ICR)The lesser of:
20% of discretionary income, or

monthly payment on a 12-year fixed plan, adjusted based on your income.
25 years

Am I Eligible?

Most federal student loans are eligible for at least one IDR plan. Review the specific eligibility requirements to see which plan(s) you qualify for. Keep in mind that your loan type can affect your eligibility for each IDR plan. In some cases, you may need to consolidate your student loans to be able to repay the loan under a plan.

Defaulted loans are not eligible for any IDR plans. Learn how to get out of default.

You can use Loan Simulator to see how your loan repayment would change under different IDR plans. Loan Simulator can help you estimate your

  • monthly payment account,
  • repayment period,
  • projected loan forgiveness, and
  • total interest you’ll pay over the life of your loan.

Loan Simulator will ask for basic information about your income, family size, tax-filing status, and state of residence and then present different plan options for you to review.

Are there any disadvantages to an IDR plan?

There are lots of pros to an IDR plan, but keep the following factors in mind:

  • You could pay more in interest over time. More interest builds up when you have lower payments over an extended payment period.
  • Any changes to either your income or family size could increase or decrease your monthly payment.
  • You may be required to pay income tax on any forgiven amount if you still have a balance at the end of your repayment period.

Contact your loan servicer if you have any questions.

I’m ready to apply. Now what?

The free process starts with submitting an Income-Driven Repayment Plan Request applicationPlease note: It is important that you log in to your account to access the application.

You will have the option to either

  • select your plan by name or
  • request that your loan servicer enroll you in the plan with the lowest monthly payment.

If you prefer a paper application, you can get one from your loan servicer.

Along with your application, you’ll need to provide income information. The easiest way to do this is by using the IRS Data Retrieval Tool to transfer your IRS tax return information directly into your application. Or you can provide documentation such as your most recent tax return. If you didn’t file taxes, other acceptable income information can include pay stubs or a letter from your employer.

Right now, you can also self-report your income if all your loans are Direct Loans. But this self-report option is only available for a limited time.

What if my income or family size changes but I already have an IDR plan?

You’re required to recertify your income or family size once a year. But what if your situation changes before your yearly deadline to recertify (for example, you lose your job or your income changes)? In that case, you can submit that information to your loan servicer and they will recalculate your payment.

Let your loan servicer know that you’re submitting the application prior to your annual deadline, so you can have your payment recalculated immediately.

Learn more about managing your loans and explore options to help make your federal student loan repayments a little less stressful.

You never have to pay for help with your federal student loans. If you have questions about managing your loans, contact your loan servicer for free help. And make sure to avoid student aid scams.