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If your monthly federal student loan payments are putting a major strain on your budget, signing up for an income-driven repayment (IDR) plan might be a good option.
IDR plans help millions of borrowers cope with their monthly student loan payments, but it’s important to understand how income-driven repayment works and the specifics of each plan.
Here’s what you should know about income-driven repayment plans and how they work:
- Which income-driven repayment plan is best for me?
- How to apply for income-driven repayment
- What if I can’t afford income-driven repayment?
- Income-driven repayment FAQs
Which income-driven repayment plan is best for me?
Under an income-driven repayment plan — one of the many federal student loan repayment options — your monthly payments will generally be limited to 10% to 20% of your discretionary income, depending on the plan. Keep in mind that some of the plans cap your payment amount while others don’t.
Additionally, you could have any remaining balance forgiven after 20 to 25 years, depending on the plan you choose.
If you have federal loans, the Department of Education offers four IDR plans to choose from:
- Income-Based Repayment (IBR)
- Pay As You Earn (PAYE)
- Revised Pay As You Earn (REPAYE)
- Income-Contingent Repayment (ICR)
Here’s an overview of how each plan works and who qualifies:
|Plan||Monthly Payment||Repayment terms|
|IBR||15% of discretionary income|
(never more than 10-year plan)
|25 years||25 years||Borrowers with partial financial hardship who borrowed before July 1, 2014
(no Parent PLUS Loans)
|New IBR||10% of discretionary income|
(never more than 10-year plan)
|20 years||20 years||Recent borrowers with partial financial hardship who took out their first loan after July 1, 2014
(no Parent PLUS Loans)
|PAYE||10% of discretionary income|
(never more than 10-year plan)
|20 years||20 years||Relatively new borrowers who meet three requirements:
(no Parent PLUS Loans)
|REPAYE||10% of discretionary income|
|20 years||25 years||Any borrower
(no Parent PLUS Loans)
|ICR||20% of discretionary income|
(or income-adjusted payment on 12-year plan)
|25 years||25 years||Any borrower
(Parent PLUS Loans must be consolidated)
Income-Based Repayment (IBR)
To qualify for both the original and new IBR plans, you must be able to demonstrate a partial financial hardship. For new borrowers who took out their loans on or after July 1, 2014, monthly payments are equal to 10% of your discretionary income, and any unpaid balance will be forgiven after 20 years of payments.
If you have older loans, your monthly payments will be 15% of your discretionary income, and it will take 25 years to qualify for student loan forgiveness.
Learn More: How Long It Takes to Pay Off Student Loans
Find out your loan score
If you’re wondering how competitive your loan is, the loan score tool below can help. Just enter your APR, credit score, monthly payment, and remaining balance (estimates are fine) to see how your loan stacks up.
Pay As You Earn (PAYE)
For many student loan borrowers, PAYE (and the nearly identical new IBR) will be the most generous IDR plan — if you can qualify. PAYE and the new IBR plan provide the lowest monthly payments (10% of discretionary income) and the shortest path to loan forgiveness (20 years).
But qualifying for PAYE can be tricky — you must be able to demonstrate a partial financial hardship. Additionally, you must have taken out your federal student loans after Sept. 30, 2011.
You could also be eligible for PAYE if you have loans that were taken out as far back as Oct. 1, 2007 — as long as you weren’t already paying back other student loans when you received them.
Check Out: What is a Graduated Repayment Plan?
Revised Pay As You Earn (REPAYE)
Just about anyone with federal student loans can enroll in the REPAYE Plan, which has helped make it the fastest-growing IDR plan. At first glance, REPAYE looks similar to PAYE and the new IBR with payments being 10% of your discretionary income.
But this plan has a couple important differences to look out for:
- Payments: Unlike IBR and PAYE, your monthly payments under REPAYE could end up exceeding what you would have paid on the 10-year Standard Repayment Plan if your earnings grow enough over time. And if you’re married, your monthly payment could be higher than it would be under other IDR plans.
- Forgiveness time: If you took out your loans to pay for undergraduate studies, you could have any remaining balance forgiven after 20 years. But if your loans were for a graduate program, it will take 25 years.
Income-Contingent Repayment (ICR)
ICR is the least generous and least popular of all IDR plans since your monthly payments are 20% of your discretionary income (or what you’d pay on a 12-year income-adjusted payment plan).
It also takes 25 years to qualify for loan forgiveness on an Income-Contingent Repayment plan — or 10 years for borrowers who qualify for Public Service Loan Forgiveness (PSLF).
What ICR does have going for it is that it’s the only IDR plan that accepts borrowers with Parent PLUS Loans — although those loans must first be converted into a federal Direct Consolidation Loan.
Check Out: Private Student Loan Consolidation
How to apply for income-driven repayment
If you’re ready to sign up for an income-driven repayment plan, follow these four steps:
- 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.
- 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.
- 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.
- 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 that 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 in 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||Fixed rates from (APR)||Variable rates from (APR)||Loan terms (years)||Loan amounts|
|2.94%+||N/A||10, 15, 20||$7,500 up to $500,000
(larger balances require special approval)
|3.85%+||5.43%+||5, 7, 10, 15, 20||$10,000 up to $250,000
(depending on degree)
|5.39%+1||5.09%+1||5, 7, 10, 15, 20||$10,000 to $500,000
(depending on degree and loan type)
|4.49%+2||3.69%+2||5, 7, 10, 12, 15, 20||$5,000 to $300,000
(depending on degree type)
|5.91%+5||6.46%+5||5, 10, 15, 20||$1,000 to $250,000|
|4.48%+3||2.99%+3||5, 7, 10, 12, 15, 20||$10,000 to $250,000|
|5.18%+4||5.12%+4||5, 10, 15, 20||$5,000 to $250,000|
|3.94%+ 7||N/A||5, 7, 10, 12, 15, 20||Up to $300,000|
|4.75%+||N/A||7, 10, 15||$10,000 up to the total amount of qualified education debt|
|5.49%+||N/A||5, 8, 12, 15||$7,500 to $300,000|
|5.29%+||N/A||5, 10, 15||$7,500 up to $250,000
(depending on highest degree earned)
|Compare personalized rates from multiple lenders without affecting your credit score. 100% free!
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
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.
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 money 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, 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.
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.
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
Matt Carter contributed to the reporting of this article.