Income Driven Repayment: Which Plan Should You Choose?

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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 you?
• How to apply for income-driven repayment
• Can’t afford income-driven repayment?
• Frequently asked questions

Which income-driven repayment plan is best for you?

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.

There are four main IDR plans to choose from for federal loans:

• 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:

Income-Based Repayment (IBR)

• Best for: Recent borrowers who don’t qualify for PAYE

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)

• Best for: Borrowers who expect to qualify for loan forgiveness

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)

• Best for: Borrowers who don’t qualify for PAYE or the new IBR

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.

However, there are a couple of 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 in 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.

Learn More: Paye vs. Repaye: Which Repayment Plan Is Right for You?

Income-Contingent Repayment (ICR)

• Best for: Borrowers with Parent PLUS Loans

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:

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 that opt for autopay.

Learn More: Extended Graduated Repayment Plans

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 even 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
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	2.94%+	N/A	10, 15, 20	$7,500 up to up to $200,000 (larger balances require special approval)
Fixed APR: 2.94%+ Variable APR: N/A Min. credit score: Does not disclose Loan amount: $7,500 up to $500,000 Loan terms (years): 10, 15, 20 Max. undergraduate loan balance: $250,000 - $500,000 Time to fund: 4 months Repayment options: Immediate repayment, forbearance, loans discharged upon death or disability Fees: None Discounts: Autopay Eligibility: Must be a resident of Kentucky Customer service: Phone Soft credit check: No Cosigner release: After 12 months Loan servicer: Kentucky Higher Education Student Loan Corporation Max. graduate loan balance: $250,000 - $500,000 Credible Review: Advantage Education Loan review 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	2.4%+	3.3%+	5, 7, 10, 15, 20	$10,000 up to $250,000 (depending on degree)
Fixed APR: 2.4%+ Variable APR: 3.3%+ Min. credit score: 690 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: Does not disclose 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	4.29%+1	2.24%+1	5, 7, 10, 15, 20	$10,000 to $500,000 (depending on degree and loan type)
Fixed APR: 4.29%+1 Variable APR: 2.24%+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	3.49%+2	3.44%+2	5, 7, 10, 12, 15, 20	$5,000 to $300,000 (depending on degree type)
Fixed APR: 3.49%+2 Variable APR: 3.44%+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	4.41%+5	4.32%+5	5, 10, 15, 20	$1,000 to $250,000
Fixed APR: 4.41%+5 Variable APR: 4.32%+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	3.39%+3	1.86%+3	5, 7, 10, 12, 15, 20	$10,000 to $250,000
Fixed APR: 3.39%+3 Variable APR: 1.86%+3 Min. credit score: 680 Loan amount: $10,000 to $250,000 Loan terms (years): 5, 7, 10, 12, 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	5.18%+4	2.45%+4	5, 10, 15, 20	$5,000 - $250,000
Fixed APR: 5.18%+4 Variable APR: 2.45%+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 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	3.94%+ 7	N/A	5, 7, 10, 12, 15, 20	Up to $300,000
Fixed APR: 3.94%+ 7 Variable APR: N/A Min. credit score: 670 Loan amount: Up to $300,000 Loan terms (years): 5, 7, 10, 15, 20 Time to fund: Usually one business day Repayment options: Academic deferral, military deferral, forbearance, death/disability discharge Fees: None Discounts: Autopay Eligibility: Available in all 50 states Customer service: Email, phone Soft credit check: Yes Cosigner release: After 24 months Max. undergraduate loan balance: $300,000 Max. graduate balance: $300,000 Offers Parent PLUS loans: Yes Min. income: None
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	4.5%+	N/A	7, 10, 15	$10,000 up to the total amount of qualified education debt
Fixed APR: 4.5%+ 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	5.49%+	N/A	5, 8, 12, 15	$7,500 to $300,000
Fixed APR: 5.49%+ Variable APR: N/A Min. credit score: 670 Loan amount: $7,500 to $300,000 Loan terms (years): 5, 8, 12, 15 Repayment options: Does not disclose Fees: None Discounts: None Eligibility: Must be a U.S. citizen and have and at least $7,500 in student loans Customer service: Email, phone, chat Soft credit check: Yes Cosigner release: After 12 months Loan servicer: PenFed Max. Undergraduate Loan Balance: $300,000 Max. Graduate Loan Balance: $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	4.29%+	N/A	5, 10, 15	$7,500 up to $250,000 (depending on highest degree earned)
Fixed APR: 4.29%+ 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
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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

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

Frequently asked questions

Here are the answers to several commonly asked questions regarding 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. However, 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?

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 forgiveness. 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

Matt Carter contributed to the reporting of this article.

About the author

Taylor Medine

Taylor Medine is a Credible authority on personal finance. Her work has been featured on Bankrate, Experian, The Balance, Business Insider, Credit Karma, and more. She’s also the author of The 60-Minute Money Plan, a self-published intro to budgeting guide for people who hate budgeting.

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