Income-Driven Repayment (IDR) plans are highly beneficial student loan tools that adjust your monthly payments according to your income and family size. Each IDR plan operates differently, but they all aim to make student loan repayment more manageable – and more affordable. Since borrowers may remain enrolled in their chosen IDR plan for decades, it’s important to understand what happens within each plan as your income changes throughout your career.
Read on to learn about how income limits pertain to IDR plans, including enrollment thresholds, requirements, the advantages of IDR for low-income individuals, and what happens when your income grows beyond the initial requirements of your IDR plan.
Why your income matters for IDR
Income-Driven Repayment is designed to make student loan repayment more manageable by tailoring monthly payments to the borrower’s income and family size. These plans can be a financial lifesaver for those with lower incomes, especially new graduates starting their careers, as they adjust monthly payments to what is affordable. IDR plans are particularly beneficial for individuals with substantial
student loan debt relative to their income, as they serve the dual purpose of facilitating debt repayment and preventing financial distress.
What are the income requirements for IDR?
Each IDR plan has unique enrollment requirements, which may not link to a specific salary (there is no “maximum income” threshold) but are implicitly tied to your income level, so certain plans wouldn’t make sense for some income brackets. Suitability for each plan largely depends on your income relative to your federal student loan debt. Learn more about each plan in the chart below:
IDR Comparison Chart
|
Applications for IDR plans and loan consolidation are available on http://studentaid.gov. You can also submit a PDF application to your loan servicer by uploading it to your servicer’s website or mailing it to them. Expect a delay in processing times. |
|
Plan |
Monthly Payments |
Repayment Period |
Status |
|
Income-Based Repayment (IBR) |
- 10-15% of your discretionary income (and your spouse’s if filing jointly)
- Never more than federal 10-year Standard Repayment Plan amount
|
20-25 years, depending on when you become a new borrower |
Accepting new enrollments. |
|
Income-Contingent Repayment (ICR) |
The lesser of the following: - 20% of your discretionary income or
- What you would pay on a repayment plan with a fixed payment over the course of 12 years, adjusted according to your income
|
25 years |
Accepting new enrollments. |
|
Pay as You Earn (PAYE) |
- 10% of your discretionary income (and your spouse’s if filing jointly)
- Never more than federal 10-year Standard Repayment Plan amount
|
20 years |
Accepting new enrollments. |
Generally, for initial eligibility, your calculated monthly payment must be less than what you would pay under the Standard Repayment Plan (a 10-year period of fixed payments) to ensure the IDR program makes sense for you.
IDR will grow with you
Don’t let the complexities of possible income limits deter you from exploring the benefits of IDR. Contact our team of experts for a comprehensive consultation and let us help you make informed decisions about your student loan repayment choices, tailored to your unique financial circumstances. Make the most of your educational investment by navigating the world of student loans with confidence.
