How Does Income-Driven Repayment Work?
Posted: 12/20/2023
UPDATE as of 09/12/2024
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 The situation is developing, so some info on this site may be out-of-date.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.
Do you need a low monthly student loan payment? An Income-Driven Repayment (IDR) Plan could be the best choice for you. IDR Plans base payments on your annual income. They can reduce your monthly bill by hundreds of dollars. You may even qualify for zero dollar payments.
Income-Driven vs. Standard Repayment
Your student loan repayment plan sets the size of your monthly payments, how many years you will be paying, and the total amount you will pay in interest. You are automatically assigned to the Standard Repayment Plan. It’s the fastest and least expensive way to pay off your debt, but it isn’t affordable for everyone.
In contrast to the Standard Repayment Plan, IDR Plans offer:
Much lower monthly payments.
A longer payoff period, meaning you will pay more interest over time.
Payments that change with your annual income.
The possibility of making smaller payments now and larger payments later.
The main advantage of an IDR Plan over the Standard Repayment Plan is the ability to control your monthly costs. Instead of making high monthly payments over 10 years, you’ll make much smaller payments over 10 to 25 years. The catch is you will pay more in interest than you would on the Standard Repayment Plan.
Types of IDR Plans
There are four IDR plans. Each has slightly different rules on how your payments are calculated and which loans qualify. What they all have in common is:
Monthly payments based on your income.
An annual income review that’s used to recalculate your monthly payment.
Possible loan forgiveness once you’ve made enough qualifying payments over a set number of years.
Check out the links below for more details about each plan:
How Do I Choose the Right IDR Plan
If you feel overwhelmed by your repayment options, the best place to start is the Loan Simulator on StudentAid.gov. It uses your current loan data to find a repayment plan that best fits your needs and goals.
To get the most accurate results from the simulator, you’ll need to log in to StudentAid.gov. That requires an FSA ID. If you don’t have an account on StudentAid.gov, follow these instructions.
If you’d prefer help or advice from a person, contact one of our Borrower Advocates. We work on behalf of schools to provide federal student loan repayment counseling. This service is free to you. We can be reached at (866) 311-9450, Monday through Friday, 9:00 a.m. to 6:00 p.m. ET.