For borrowers struggling with high monthly payments in relation to their income, enrolling in an IDR plan could help alleviate the pressure that student loan debt can put on a budget.
Published August 22, 2023
9 min read
As federal student loan borrowers strategize around how to fit monthly payments back into their budgets following the end of the federal student loan payment and interest pause, Income-driven Repayment (IDR) could be a good option to consider.
For those struggling with high monthly payments in relation to their income, enrolling in an IDR plan could help alleviate the pressure that student loan debt can put on a budget. Let’s take a closer look at different plans within the IDR program, how monthly payment amounts are calculated within different plans, and how you can apply.
IDR provides federal borrowers with options other than forbearance when they have trouble making their student loan payments through the government’s traditional repayment plans such as the Standard Repayment Plan, Gradudated Repayment Plan, or Extended Repayment Plan.
Under an IDR plan, monthly payments are typically lower than the payments a borrower would make in the 10-year Standard Repayment Plan. IDR also provides a path to eventual forgiveness after 20 or 25 years of repayment, depending on which plan you enroll in. The IDR program includes the following plans:
*As of Summer 2023, SAVE, will be available to student borrowers with a Direct Loan in good standing, and will replace the existing Revised Pay-As-You-Earn (REPAYE) plan. Borrowers who are already on the REPAYE plan will be automatically enrolled in the SAVE plan and will see their payments automatically adjust with no action on their part. While the Department makes this transition, borrowers may see the names REPAYE and SAVE used interchangeably. Borrowers can sign up for the SAVE/REPAYE plan by visiting StudentAid.gov/IDR.
Each plan uses a different formula to set up repayment structures based on a borrower’s adjusted gross income and family size. Borrowers typically qualify for more than one type of IDR plan. For more details on each IDR plan and help understanding which one might be right for your financial situation, reach out to one of our or visit our other student loan forgiveness resources:
| IDR Plan | Eligible Loans |
|---|---|
| ICR |
|
| IBR |
|
| PAYE |
|
| SAVE / REPAYE |
|
For eligible federal borrowers, past periods of repayment, deferment, and forbearance could now count toward IDR forgiveness with this one-time payment count adjustment. Some borrowers will need to apply for a Direct Consolidation Loan by the end of 2023 to get the full benefits of this program. Schedule a consultation to learn if you may qualify.
To understand if you’re eligible for IDR, you will first need to understand what type(s) of federal student loans you have and what your household income is. Review the different types of plans to better understand your eligibility for each type.
If you have parent PLUS loans, you must consolidate them to become eligible for IDR. If you’re unsure or have questions, you could schedule a free call with a student loan specialist for guidance. Learn more about qualifying for student loan forgiveness through IDR here.
Also note that enrollment in one of the IDR plans is an important aspect of Public Service Loan Forgiveness (PSLF),1 a US government program available exclusively to federal borrowers employed at qualifying nonprofits and government organizations.
Income-Driven Repayment and Public Service Loan Forgiveness (PSLF)
Through PSLF, Federal Direct Loans are forgiven after ten years of qualifying payments under an IDR plan. To be eligible for PSLF, you must:
While IDR is available to federal borrowers in both the private and public sector, PSLF is exclusively available to a subset of federal borrowers working in government or at qualifying nonprofits. Historically, the PSLF program has had frequently changing rules and requirements since 2017, when Federal Student Aid began accepting applications for the program. Learn more about the program at studentaid.gov or see our PSLF resources:
Generally, your monthly payment amount under an IDR plan is a percentage of your discretionary income, and the percentage varies by plan. The chart below breaks down how payment amounts are determined under each plan, and any changes to the plan following the SCOTUS ruling announced June 30, 2023.
Depending on your income and family size, you could have no monthly payment at all – a situation that is even more likely under the new SAVE plan that’s replacing REPAYE.
| Plan | Monthly Payments | Repayment Period | Status |
|---|---|---|---|
| Income-Based Repayment (IBR) |
|
20-25 years, depending on when you become a new borrower | Remains available but borrowers cannot select plan after 60 payments on REPAYE that occur on/after July 1, 2024 |
| Pay as You Earn (PAYE) |
|
20 years | Not accepting new enrollments as of July 2023 |
| SAVE (formerly REPAYE) |
|
|
This plan replaces REPAYE |
| Income-Contingent Repayment (ICR) |
The lesser of the following:
|
25 years | Not accepting enrollments for current students; only available to future borrowers with consolidated Parent PLUS loans |
**In the IBR Plan, you’re considered a new borrower on or after July 1, 2014, if you had no outstanding balance on a William D. Ford Federal Direct Loan (Direct Loan) Program loan or Federal Family Education Loan (FFEL) Program loan when you received a Direct Loan on or after July 1, 2014.
Note that other factors beyond loan type could affect your eligibility and whether a certain plan is the right choice for you. Be sure you read the fine print of each plan, and learn more in our Guide to Federal Repayment Programs and Types of Income-Driven Repayment Plans for Your Career.
Once you understand your IDR plan options, you can apply through the Student Aid website by following these steps:
You can use the estimator tool within your IDR application to compare payments under different plans or to have your loan servicer pick the right one for you. Also, note that you can switch out of your IDR plan and apply to a different one at any point in your enrollment if your circumstances change. For more details on applying for IDR, visit our other student loan forgiveness resources:
Once you’ve completed the IDR application process and received confirmation of enrollment, you’ll need to recertify your income each year to remain on the plan and not have a lapse. Your annual recertification will likely fall 12 months after you initially entered your IDR plan, and your student loan servicer should notify you when your time to recertify is coming up. Learn more about annual recertification at https://studentaid.gov/idr/.
While federal borrowers from a wide range of educational backgrounds and career fields find they qualify for more than one IDR plan, determining which one is right for you requires research, reading the fine print, and staying current on the latest student loan policy developments.
Our dedicated team of student loan specialists stays up-to-date with all repayment and forgiveness programs and can offer guidance and expertise through your IDR application process. For more IDR information, schedule a complimentary 30-minute consultation. Our specialized team can help guide you to the right IDR plan based on your unique financial situation, taking income level, marital filing status, children, possible career trajectory, tax implications, and your financial goals into account.
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To qualify for PSLF, you must be employed by a U.S. federal, state, local, or tribal government or not-for-profit organization (federal service includes U.S. military service); work full-time for that agency or organization; have Direct Loans (or consolidate other federal student loans into a Direct Loan); repay your loans under an income-driven repayment plan; and make 120 qualifying payments. For full program requirements visit: Federal Student Aid.
