Legal action against the SAVE Plan has limited student loan repayment options. The situation is developing, so some info on this site may be out-of-date. You’ll find our latest update on SAVE here and news on all IDR plans here.

How Do Income-Driven Repayment Plans Work?

There are four income-driven repayment (IDR) plans. They all use your annual income and family size to determine your monthly student loan payment.

Each IDR plan has its own set of rules. They impact exactly how much you’ll be paying each month and how many years your repayment will last. The plan you select also affects your path to loan forgiveness.

To qualify for a specific IDR plan, your loans must meet its eligibility requirements. If your current loans don’t qualify, you may be able to consolidate into a new loan that is eligible.

The four IDR plans are:

Saving on a Valuable Education (SAVE) Repayment Plan

Monthly Payments

This is generally set at 10% of your discretionary income.

Discretionary Income

Defined as your income minus 225% of the federal poverty line. See What is Discretionary Income? for more details.

Path to Loan Forgiveness

SAVE offers a tiered path to loan forgiveness that’s based on the amount you originally borrowed:

If you borrowed $12,000 or less, and make qualifying payments for 10 years, your remaining debt will be forgiven.
For each additional $1,000 borrowed, add and another year of payments. If you borrowed $13,000, you would pay for 11 years.
Your repayment period is capped at 20 years for undergraduate loans and 25 years for graduate loans. At the end of that time, any outstanding debt will be forgiven regardless of how much you owe.

Eligible Loans

The following loans can be repaid under this repayment plan:

Direct Subsidized Loans
Direct Unsubsidized Loans
Direct PLUS Loans made to graduate or professional students
Direct Consolidation Loans that did not repay any PLUS loans made to parents

Additionally, the following loans are eligible if consolidated:

Subsidized Federal Stafford Loans (from the FFEL Program)
Unsubsidized Federal Stafford Loans (from the FFEL Program)
FFEL PLUS Loans made to graduate or professional students
FFEL Consolidation Loans that did not repay any PLUS loans made to parents
Federal Perkins Loans

New for 2023

The SAVE Plan replaced the old REPAYE Plan. If you were on REPAYE, you should have been automatically moved to SAVE.

Pay as You Earn (PAYE) Repayment Plan

Monthly Payments

This is generally set at 10% of your discretionary income and can never be higher than what you’d pay on a Standard Repayment Plan.

Discretionary Income

Defined as your income minus 150% of the federal poverty line. See What is Discretionary Income? for more details.

Path to Loan Forgiveness

Any outstanding loan balance will be forgiven after 20 years of qualifying payments. The amount that is forgiven will be considered taxable income.

Eligible Loans

The following loans can be repaid under this repayment plan:

Direct Subsidized Loans
Direct Unsubsidized Loans
Direct PLUS Loans made to graduate or professional students
Direct Consolidation Loans that did not repay any PLUS loans made to parents

Additionally, the following loans are eligible if consolidated:

Subsidized Federal Stafford Loans (from the FFEL Program)
Unsubsidized Federal Stafford Loans (from the FFEL Program)
FFEL PLUS Loans made to graduate or professional students
FFEL Consolidation Loans that did not repay any PLUS loans made to parents
Federal Perkins Loans

Income-Based Repayment (IBR) Plan

Monthly Payments

There are two versions of the IBR plan. One sets the monthly payment at 10% of your discretionary income. The other sets it at 15% of discretionary income. Which plan you qualify for depends on the dates you took out your student loans. Payments on both plans can never be higher than what you’d pay on a Standard Repayment Plan.

Discretionary Income

Defined as your income minus 150% of the federal poverty line. See What is Discretionary Income? for more details.

Path to Loan Forgiveness

Any outstanding loan balance will be forgiven after 20 or 25 years of qualifying payments. The amount that is forgiven will be considered taxable income.

Eligible Loans

The following loans can be repaid under this repayment plan:

Direct Subsidized Loans
Direct Unsubsidized Loans
Direct PLUS Loans made to graduate or professional students
Direct Consolidation Loans that did not repay any PLUS loans made to parents
Subsidized Federal Stafford Loans (from the FFEL Program)
Unsubsidized Federal Stafford Loans (from the FFEL Program)
FFEL PLUS Loans made to graduate or professional students
FFEL Consolidation Loans that did not repay any PLUS loans made to parents

Additionally, the following loans are eligible if consolidated:

Federal Perkins Loans

Income-Contingent Repayment (ICR) Plan

Monthly Payments

This can be either 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.

Discretionary Income

Defined as your income minus 100% of the federal poverty line. See What is Discretionary Income? for more details.

Path to Loan Forgiveness

Any outstanding loan balance will be forgiven after 25 years of qualifying payments. The amount that is forgiven will be considered taxable income.

Available for Parent PLUS Loans

This is the only IDR Plan available to parents who took out PLUS loans to pay for their child’s education.

Eligible Loans

The following loans can be repaid under this repayment plan:

Direct Subsidized Loans
Direct Unsubsidized Loans
Direct PLUS Loans made to graduate or professional students
Direct Consolidation Loans that did not repay any PLUS loans made to parents
Direct Consolidation Loans that repaid PLUS loans made to parents

Additionally, the following loans are eligible if consolidated:

Direct PLUS Loans made to parents
Subsidized Federal Stafford Loans (from the FFEL Program)
Unsubsidized Federal Stafford Loans (from the FFEL Program)
FFEL PLUS Loans made to graduate or professional students
FFEL PLUS Loans made to parents
FFEL Consolidation Loans that did not repay any PLUS loans made to parents
FFEL Consolidation Loans that repaid PLUS loans made to parents
Federal Perkins Loans

Capped Interest

Accrued interest capitalized is capped at 10% of the principal balance at the time your entered repayment. After the maximum is reached, interest continues to accrue but is not capitalized.

What is Discretionary Income?

Most IDR Plans use your discretionary income to set your monthly payment amount. In everyday speech the term refers to the portion of your income that isn’t spent on taxes and necessities such as food, shelter and clothing.

Government programs use a more technical definition. For the purposes of an IDR Plan, discretionary income is the difference between your adjusted gross income (AGI) and a set percent of the Federal Poverty Guideline.

The value of the Federal Poverty Guideline varies based on the size of your family and where you live. The value ‘Y’ is set by the IDR Plan. The percentage varies from 100% to 225%. Be sure to note the difference when comparing plans.

Where Can You Learn More about Income-Driven Plans?

Most federal student loans are eligible for at least one of the above income-driven repayment plan. You can learn more about each plan by visiting StudentAid.gov.