Income Driven Repayment: Which Plan Should You Choose?

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If you find it difficult to repay your student loans on your current income, you’re not alone. Thankfully, the government understands this struggle and offers income-driven repayment plans to eligible federal student loan borrowers.

Income-driven repayment plan details, requirements, and qualifications vary. Although these repayment plans offer advantages for borrowers, they come with some drawbacks, too. Let’s review the types of income-driven repayment plans, updates for 2023, and if these repayment strategies are right for you.

In this post:

• What is income-driven repayment?
• Are there any qualifications for income-driven repayment plans?
• Pros of income-driven repayment
• Cons of income-driven repayment
• Is income-driven repayment right for you?
• New changes
• How to apply for income-driven repayment
• What if I can’t afford income-driven repayment?
• Income-driven repayment FAQs

What is income-driven repayment?

An income-driven repayment plan is a repayment program available for eligible federal student loan borrowers. This program adjusts the monthly minimum payment based on a borrower’s income and family size.

These payments amount to either a percentage of the borrower’s discretionary income or the amount they would pay under a 10-year Standard Repayment Plan, depending on which income-driven repayment plan they have.

For example, a borrower may have an annual income of $30,000 living with their partner and three children. This borrower falls below the $32,470 poverty guideline for a family of five, according to the 2022 Poverty Guidelines. Their monthly payment may be as low as 10% of their discretionary income or they may have no monthly payment at all due to their income level and family size.

For many borrowers, these programs lower their monthly payment to a manageable level. After making certain income-driven plan payments on time for 20 to 25 years, the borrower may be eligible to have the remaining balances on their federal student loans forgiven.

There are four different income-driven repayment plans that a borrower may qualify for, each with its own criteria for determining the borrower’s monthly payment.

Revised Pay As You Earn Repayment Plan (REPAYE Plan)

The REPAYE Plan requires monthly payments that are typically equal to 10% of the borrower’s discretionary income, divided by 12.

Pay As You Earn Repayment Plan (PAYE Plan)

The PAYE Plan requires monthly payments that are typically equal to 10% of the borrower’s discretionary income, divided by 12, though never more than the 10-year Standard Repayment amount.

Income-Based Repayment Plan (IBR Plan)

The IBR Plan requires a monthly payment based on whether or not the borrower was a new borrower on July 1, 2014. If they were a new borrower on or after that date, they’ll generally pay 10% of their discretionary income, though never more than the 10-year Standard Repayment Plan amount.

If they were not a new borrower on or after that date, they’ll generally pay 15 percent of their discretionary income, though never more than the 10-year Standard Repayment Plan amount.

Income-Contingent Repayment Plan (ICR Plan)

The ICR Plan requires a monthly payment based on whichever of the following options is a lesser amount: 20% of the borrower’s discretionary income, or, what the borrower would pay on a repayment plan with a fixed payment over the course of 12 years, adjusted according to their income.

Are there any qualifications for income-driven repayment plans?

While many borrowers are eligible for an income-driven repayment plan, unfortunately, some borrowers will not qualify. These plans require certain criteria be met regarding income level, household size, and loan amount. Even a borrower’s geographical location can have an impact on eligibility. Specifically, the government will look at:

• Your total annual income and your discretionary income
• The type of federal student loan(s) you have
• The amount of your outstanding loans and the date you received them
• Your family size, home state, and the poverty level guidelines of that state
• The 10-year Standard Repayment Plan amount

Who do you need to contact about an income-driven repayment plan?

Contact your federal student loan servicer to learn more about your income-driven repayment plan eligibility. They can also help you apply for these plans for free.

Who qualifies for an income driven repayment plan?

Borrowers may qualify for one, multiple, or none of the income-driven repayment plans depending on their loan status, income level, and type of loan. For instance, defaulted loans are not eligible for any of the income-driven repayment plans.

• For REPAYE and ICR: Any borrower with eligible federal student loans can qualify.
• For ICR: Only parent PLUS loan borrowers are eligible.
• For PAYE and IBR: The borrower generally qualifies if their federal student loan debt is higher than their annual discretionary income or is a significant portion of their annual total income.
• For PAYE: The borrower must be considered a new borrower with no outstanding Direct Loan or FFEL Program loan balance.

What information do you need to provide for an income driven repayment plan?

Borrowers will need to provide information to their servicer regarding their annual income and their family size. The borrower must recertify this information annually so that their servicer can make payment recalculations if necessary.

Learn More: How to Recertify for Income-Driven Repayment

Pros of income-driven repayment

With an estimated 30% of federal student loan borrowers currently using an income-driven repayment plan, it’s clear that many borrowers are benefiting from these programs. There are many positives to applying for an income-driven repayment plan, including:

• • Your credit score isn’t affected. When you apply or you’re accepted into the plan, your score won’t be impacted.
  • Helps a variety of borrowers. These plans help borrowers whose income levels are disproportionately low compared to the amount they owe in student loans. Teachers and nurses, for example, may have significant student loan debt and also fall below the poverty line when their income level and family size is factored in.

• A repayment plan suited to your situation. Income-driven repayment plans take these and other factors into consideration to create a monthly repayment amount that better suits each borrower’s individual financial situation.

• Possible $0 monthly payment. Some borrowers may even qualify for a $0 monthly payment which still counts as an active “payment” toward their student loans.

Cons of income-driven repayment

Be aware of the potential drawbacks when considering an income-driven repayment plan:

• • You must prove your eligibility. You need to prove that you’re eligible before getting accepted. This involves submitting information about your annual income, annual discretionary income, and your family size.
  • Your minimum monthly payment may increase. You’ll need to resubmit your information each year, and depending on changes to your situation, your minimum monthly repayment amount may be recalculated and raised.

• You may find it difficult to keep up with payments. Because your repayment amount is based on your discretionary income level, some borrowers may find it difficult to keep up with these monthly payments if their income varies from month to month. For instance, an independent contractor may have their amount set based on the prior year’s earnings; if they have slow months of work or lose clients, they may still find it difficult to repay their set monthly balance.

• You may find that income-driven repayment is still unaffordable. Unfortunately, some reports cite that many borrowers find that income-driven payments are still unaffordable in their current financial situation. Some also see an increase in the loan balances which could cause them to feel overwhelmed and less likely to maintain their eligibility.

Check Out: The Federal Student Loan Repayment Calculator – Strengths and Limitations

Is income-driven repayment right for you?

While some borrowers will greatly benefit from an income-driven repayment plan, others will find limited advantages. Multiple plan types, customized repayment plans, and the potential for substantial savings offer more options for more borrowers. However, not all borrowers will see significant savings — some may even see their loan balance grow under these programs.

If your monthly payment on an income-driven repayment plan would be more than your minimum monthly payment on a standard repayment plan, then it’s likely not the right choice for you.

However, if your servicer believes that you’d qualify for a repayment amount as low as $0 per month, you should investigate further and take advantage of this assistance.

See Also: Choosing Income-Driven Repayment vs. Refinancing Student Loans

New changes

The federal government plans to reform income-driven student loan repayment plans in ways that make these plans simpler and more accessible for borrowers. Some of these proposed changes include:

• Lowering the discretionary income percentage limit from 10% to 5% for undergraduate loans
• Guaranteeing that borrowers who earn under 225% of the federal poverty level (equivalent to $15 minimum wage earnings for a single borrower) won’t have to make a monthly payment
• Forgive loan balances of $12,000 or less after 10, not 20, years
• Ensure that no borrower’s loan balance on an income-driven repayment plan will grow due to interest as long as they make their minimum monthly payments (including borrowers with $0 monthly payments)

These reforms project that many borrowers will save thousands of dollars annually on their student loan repayment costs. Borrowers can also opt to let the Department of Education automatically pull their annual income information so that the borrower does not need to manually provide this information.

How to apply for income-driven repayment

If you’re ready to sign up for an income-driven repayment plan, follow these four steps:

1. Start the application. You’ll need to complete an Income-Driven Repayment Plan Request. You can do this online at StudentAid.gov — keep in mind that you’ll need a Federal Student Aid (FSA) login to do this. Or you can submit the paper application available from your loan servicer.
2. Provide your income information. If you apply online, you can use the IRS Data Retrieval Tool to transfer your income information directly from your federal income tax return. This will help ensure that your income facts are accurate and that your application is processed as quickly as possible. If you submit a paper application, you’ll need to provide a copy of your most recent federal tax return.
3. Choose a plan. You can select one of the four IDR plans yourself, or your loan servicer can figure out which plans you qualify for and then put you in the plan with the lowest monthly payment.
4. Begin making payments. Once you’ve successfully applied for an IDR plan, you’ll start making your new monthly payments. You could also consider signing up for autopay to make sure you won’t miss any future payments — your servicer might even provide a rate discount to borrowers who opt for autopay.

Learn More: Extended Graduated Repayment Plans

What if I can’t afford income-driven repayment?

If you still can’t afford your federal student loan payments on an IDR plan, applying for federal forbearance or deferment might be a good idea. Both of these options allow you to temporarily pause your payments, though remember that interest might continue to accrue while you’re not making payments.

Another possible option is to refinance your student loans. Depending on your credit, you might qualify for a lower student loan interest rate — this could save you money on interest and potentially help you pay off your loans faster.

Or you might opt to extend your repayment term to reduce your monthly payment and lessen the strain on your budget — though you’ll pay more interest over time.

If you decide to refinance your student loans, be sure to consider as many student loan refinance companies as possible to find the right loan for you. Credible makes this easy — you can compare your prequalified rates from our partner lenders in the table below in two minutes.

Lender	Variable rates from (APR)	Fixed rates from (APR)
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	5.31%+	4.9%+
Fixed APR: 4.9%+ Variable APR: 5.31%+ Min. credit score: 720 Loan amount: $10,000 to $400,000 Loan terms (years): 5, 7, 10, 15, 20 Repayment options: Military deferment, forbearance Fees: Late fee Discounts: Autopay Eligibility: Must have a credit score of at least 720, a minimum income of $60,000, and must be a resident of Texas Customer service: Email, phone Soft credit check: 720 Cosigner release: No Loan servicer: Firstmark Services Max. Undergraduate Loan Balance: $100,000 - $149,000 Max. Graduate Loan Balance: $200,000 - $400,000 Offers Parent PLUS Refinancing: Does not disclose
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	7.06%+1	6.79%+1
Fixed APR: 6.79%+1 Variable APR: 7.06%+1 Min. credit score: Does not disclose Loan amount: $10,000 to $750,000 Loan terms (years): 5, 7, 10, 15, 20 Repayment options: Immediate repayment, academic deferment, military deferment, forbearance, loans discharged upon death or disability Fees: Late fee Discounts: Autopay, loyalty Eligibility: Must be a U.S. citizen or permanent resident and have at least $10,000 in student loans Customer service: Email, phone, chat Soft credit check: Yes Cosigner release: After 24 to 36 months Loan servicer: Firstmark Services Max. Undergraduate Loan Balance: $100,000 to $149,000 Max. Graduate Loan Balance: Less than $150,000 Offers Parent PLUS Refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	6.99%+2	6.99%+2
Fixed APR: 6.99%+2 Variable APR: 6.99%+2 Min. credit score: Does not disclose Loan amount: $5,000 to $300,000 Loan terms (years): 5, 7, 10, 12, 15 Repayment options: Military deferment, forbearance, loans discharged upon death or disability Fees: Late fee Discounts: Autopay Eligibility: All states except for ME Customer service: Email, phone, chat Soft credit check: Yes Cosigner release: After 24 to 36 months Loan servicer: College Ave Servicing LLC Max. Undergraduate Loan Balance: $100,000 to $149,000 Max. Graduate Loan Balance: Less than $300,000 Offers Parent PLUS Refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	8.04%+5	6.0%+5
Fixed APR: 6.0%+5 Variable APR: 8.04%+5 Min. credit score: 700 Loan amount: $7,500 to $200,000 Loan terms (years): 5, 10, 15, 20 Repayment options: Immediate repayment, academic deferment, forbearance, loans discharged upon death or disability Fees: None Discounts: Autopay Eligibility: Must be a U.S. citizen or permanent resident and submit two personal references Customer service: Email, phone Soft credit check: Yes Cosigner release: After 36 months Loan servicer: Granite State Management & Resources (GSM&R) Max. Undergraduate Loan Balance: $150,000 to $249,000 Max. Graduate Loan Balance: $150,000 to $199,000 Offers Parent PLUS Refinancing : Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	5.28%+3	5.23%+3
Fixed APR: 5.23%+3 Variable APR: 5.28%+3 Min. credit score: 680 Loan amount: $10,000 to $250,000 Loan terms (years): 5, 7, 10, 15, 20 Repayment options: Forbearance Fees: None Discounts: None Eligibility: Must be a U.S. citizen or permanent resident, have at least $15,000 in student loan debt, and have a bachelor’s degree or higher from an approved school Customer service: Email, phone Soft credit check: Yes Cosigner release: No Loan servicer: Mohela Max. Undergraduate Loan Balance: $250,000 Max. Graduate Loan Balance: $250,000 Offers Parent PLUS Refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	8.12%+4	5.9%+4
Fixed APR: 5.9%+4 Variable APR: 8.12%+4 Min. credit score: 670 Loan amount: $5,000 to $250,000 Loan terms (years): 5, 10, 15, 20 Repayment options: Academic deferment, military deferment, forbearance Fees: Late fee, returned payment fee Discounts: Autopay Eligibility: Must be U.S. citizen or permanent resident Customer service: Email, phone, chat Soft credit check: Yes Cosigner release: Yes Max undergraduate loan balance: $250,000 Max graduate loan balance: $250,000 Offers Parent PLUS refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	5.02%+	4.49%+
Fixed APR: 4.49%+ Variable APR: 5.02%+ Min. credit score: 700 Loan amount: $5,000 to $300,000 Loan terms (years): 5, 7, 10, 15 Max. undergraduate Loan Balance: $125,000 Time to Fund: 10 to 30 days Repayment options: Immediate repayment, forbearance Fees: Late fee Discounts: Autopay Eligibility: Must be a U.S. citizen or permanent resident and have already graduated with at least an associate degree from an eligible institution Customer service: Email, phone Soft credit check: Yes Cosigner release: After 12 months Loan servicer: LendKey Technologies Inc. Max. graduate Loan Balance: $175,000 Credible Review: LendKey Student Loans review Offers Parent PLUS Refinancing: No
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	N/A	5.75%+
Fixed APR: 5.75%+ Variable APR: N/A Min. credit score: 670 Loan amount: $10,000 up to the total amount Loan terms (years): 7, 10, 15 Repayment options: Military deferment, loans discharged upon death or disability Fees: None Discounts: None Eligibility: Must be a U.S. citizen or permanent resident and have at least $10,000 in student loans Customer service: Email, phone Soft credit check: Yes Cosigner release: No Loan servicer: AES Max. Undergraduate Loan Balance: No maximum Max. Gradaute Loan Balance: No maximum Offers Parent PLUS Refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	7.12%+ - 10.79%+8	7.59%+ - 14.49%+8
Fixed APR: 7.12%+ - 10.79%+8 Variable APR: 7.59%+ - 14.49%+8 Min. credit score: Mid-to-high 600's FICO8 Loan amount: $5,000 to $500,000 (depending on degree) Loan terms (years): 5, 7, 10, 15, 20, 25 years8 Time to fund: 3 business days Repayment options: Immediate Fees: Late fee, NSF fee Discounts: Autopay8 Eligibility: Must be a U.S. citizen or have permanent residency status with a valid U.S. Social Security number Customer service: Email, phone Soft credit check: Yes8 Cosigner release: After 24 months8 Loan servicer: Firstmark Services Max. undergraduate loan balance: $125,000 Max. graduate loan balance: $500,000 Offers Parent PLUS loans: Yes Min. income: You or your cosigner must meet Nelnet Bank's income criteria
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	N/A	5.79%+
Fixed APR: 5.79%+ Variable APR: N/A Min. credit score: 680 Loan amount: $7,500 to $250,000 Loan terms (years): 5, 10, 15 Repayment options: Academic deferment, military deferment, forbearance, loans discharged upon death or disability Fees: None Discounts: Autopay Eligibility: Available in all 50 states; must also have at least $7,500 in student loans and a minimum income of $40,000 Customer service: Email, phone Soft credit check: Does not disclose Cosigner release: No Loan servicer: Rhode Island Student Loan Authority Max. Undergraduate Loan Balance: $150,000 - $249,000 Max. Graduate Loan Balance: $200,000 - $249,000 Offers Parent PLUS Refinancing: Yes
Compare personalized rates from multiple lenders without affecting your credit score. 100% free! Compare Now Trustpilot
All APRs reflect autopay and loyalty discounts where available | 1Citizens Disclosures | 2College Ave Disclosures | 5EDvestinU Disclosures | 3 ELFI Disclosures | 4INvestEd Disclosures | 7ISL Education Lending Disclosures  | 8Nelnet Bank Disclosures

Check Out: When Student Loan Refi Is a Good Idea and When to Reconsider

Income-driven repayment FAQs

Here are the answers to several commonly asked questions about income-driven repayment:

Will income-driven repayment hurt my credit score?

No, applying for income-driven repayment doesn’t require a credit check, so it won’t affect your credit score.

Additionally, signing up for an IDR plan could make it easier for you to access credit in the future by reducing your debt-to-income (DTI) ratio — the amount you owe in monthly debt payments compared to your income.

By reducing your student loan payment, you might also be able to lower your DTI ratio, which could help you get approved for new loans.

Learn More: 3 Ways to Refinance Student Loans with Bad Credit

Are income-driven repayment plans forgiven after 20 years?

This depends on which plan you sign up for. Under the new IBR, PAYE, and REPAYE (for undergraduate loans) plans, your student loans could be forgiven after 20 years.

Under the original IBR, ICR, and REPAYE (for graduate loans) plans, you could have any remaining balance forgiven after 25 years.

Check Out: How to Pay Off $30,000 in Student Loans

What is the max income for income-based repayment?

There isn’t a max income requirement for repayment plans. But keep in mind that you’ll have to demonstrate financial hardship to qualify for the IBR and PAYE plans.

REPAYE and ICR don’t have this requirement, so you could consider those options if you’re not eligible for the other plans.

Learn More: What Happens When You Default on a Student Loan?

What should I do if I become a high-income earner?

If you reach a point in your career where you earn too much to qualify for an IDR plan, you might consider refinancing your loans to get a lower interest rate. Having a lower interest rate could help keep your monthly payments affordable.

Just keep in mind that refinancing federal loans into a private loan will mean losing access to federal benefits, such as forbearance and loan forgiveness.

Which income-driven repayment plan is best for PSLF?

If you’re going to pursue PSLF (Public Service Loan Forgiveness), it’s a good idea to keep your payments low so you can have more of your balance forgiven. In this case, IBR, PAYE, and ICR are generally the best plans for PSLF since your payments could be higher on other plans.

Remember that your loan balance must be high compared to your income to qualify for IBR or PAYE. If you’re ineligible for those plans, ICR could be another option.

Check Out: Refinance Student Loans With a Cosigner in 3 Steps

How are income-driven repayment plans calculated?

Your payments on an income-driven repayment plan are calculated as a percentage of your discretionary income, which is income that you have after paying for basic needs.

The government calculates discretionary income by subtracting your AGI from 100% or 150% of the poverty line in your area (depending on the IDR plan).

Learn More: How to Pay off Student Loans in 10 Years or Less

How long does it take to get approved for income-driven repayment?

It could take a few weeks for your income-driven repayment application to be processed. However, some borrowers have had to wait for several months for their application to be reviewed, according to the Consumer Financial Protection Bureau.

Because of this potential wait time, it’s best to apply for an IDR plan as soon as possible. If you have any questions regarding your application, be sure to contact your loan servicer.

Check Out: Can You Refinance a Student Loan to a 30-Year Term?

Does filing jointly affect income-based repayment?

This depends on the IDR plan. If you sign up for PAYE, IBR, or ICR and file your taxes jointly, then both your income and your spouse’s income could affect your eligibility and monthly payment. But if you file separately under these plans, only your income will be considered.

With the REPAYE plan, both your income and your spouse’s income will be used to calculate your monthly payment — no matter if you file separately or jointly.

Keep Reading: Consolidating Student Loans With Your Spouse

Taylor Medine has contributed to the reporting of this article.

About the author

Nick Dauk

Nick Dauk is a Credible authority on personal finance. His work has been featured in Business Insider, The Edge, Bisnow, The Telegraph, BBC, and Culture Trip.

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