How do Income-Driven Repayment plans work?
Monthly payments for Income-Driven Repayment (IDR) plans are based on a borrower’s income, tax filling status, and family size. The repayment periods for IDR plans can be up to 20 or 25 years. Unlike other repayment plans that require the loan to be repaid in full over time, IDR plans offer forgiveness of the loans balance at the end of the repayment period (typically 20-25 years). Monthly payments can be as low as $0 for some borrowers and still count toward forgiveness.
Borrowers enrolled in IDR plans do not have to apply for the forgiveness. The Department of Education and the loan servicers are responsible for identifying borrowers on these plans who have made enough qualifying payments to receive forgiveness.
The Department of Education currently offers multiple Income-Driven Repayment plans:
Saving on a Valuable Education (SAVE)—Formerly REPAYE, Payments that are generally 10% of your discretionary income. The remaining unpaid balance of loans is forgiven after 20 or 25 years of making qualifying payments. (Starting in 2024, the terms are expected to change to 5% of your discretionary income for payments on undergraduate loans, and unpaid balances will be forgiven after 10 years for borrowers with original principal balances of $12,000 or less.)
Income-Contingent Repayment (ICR)—Payments are 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. The remaining unpaid balance of loans is forgiven after 25 years of making qualifying payments
Income-Based Repayment (IBR)—Depending on when you first took out loans (before or on or after July 1, 2014), payments are generally 10% or 15% of the borrower’s discretionary income, but never more than the 10-year Standard repayment plan amount. The remaining unpaid balance of loans is forgiven after 20 or 25 years of making qualifying payments.
Pay As You Earn (PAYE)—Payments are generally 10% of your discretionary income, but never more than the 10 year Standard repayment plan amount. The remaining unpaid balance of loans is forgiven after 20 years of making qualifying payments.