Table of Contents
Key Points
• Income-driven repayment plans base monthly student loan payments on income and family size, extending loan terms to 20 or 25 years.
• Three income-driven repayment plans are currently available: Income-Based Repayment, Income-Contingent Repayment, and Pay As You Earn.
• Income-driven repayment plans offer borrowers more flexibility in managing student loan debt.
• Alternative repayment options for current borrowers include the Standard Repayment Plan, the Graduated Repayment Plan, and the Extended Repayment Plan.
• Changes to all federal student loan repayment plans are expected due to recent legislation.
If you’re on the standard 10-year repayment plan and your federal student loan payments are high relative to your income, a student loan income-driven repayment plan may be an option for you.
Income-driven repayment bases your monthly payments on your income and family size. Due to recent legislation, your options for income-driven plans will be changing over the next few years.
Read on to learn about which repayment plans are currently available and what to expect in the near future.
What Is an Income-Driven Repayment Plan?
Income-driven student loan repayment plans were conceived to ease the financial hardship of government student loan borrowers and help them avoid default when struggling to pay off student loans.
Those who enroll in the plans tend to have large loan balances and/or low earnings. Graduate students, who usually have bigger loan balances than undergrads, are more likely to enroll in a plan.
The idea is straightforward: Pay a percentage of your monthly income above a certain threshold for 20 or 25 years. On the Income-Based Repayment (IBR) plan, you are then eligible to get any remaining balance forgiven.
Income-driven repayment plans are also the only repayment options that will help you qualify for the Public Service Loan Forgiveness program. (Standard Repayment also qualifies, but you probably wouldn’t have any debt left to forgive after 10 years.)
In mid-2025, about 12.3 million borrowers were enrolled in an income-driven repayment plan.
💡 Quick Tip: Often, the main goal of refinancing is to lower the interest rate on your student loans — federal and/or private — by taking out one loan with a new rate to replace your existing loans. Refinancing may make sense if you qualify for a lower rate and you don’t plan to use federal repayment programs or protections. Note that refinancing with a longer term can increase your total interest charges.
How Income-Driven Plans Differ from Standard Repayment?
So, how do income-driven repayment plans work? Do income-driven repayment plans accrue interest? And how do they compare to the Standard Repayment Plan?
Income-driven repayment adjusts your monthly student loan payment in accordance with your income and family size. It also extends your loan terms to 20 or 25 years. These plans are meant to provide relief for borrowers who have trouble affording payments on the standard plan. If your income changes, your monthly payments will change along with it.
Your loans do accrue interest on an income-driven plan, but the IBR plan offers some relief. Specifically, the government will pay any interest charges that your monthly payments don’t cover on subsidized loans for up to three years. However, you’re responsible for all the interest after this three-year period. You always have to pay the interest that accrues on unsubsidized loans.
By contrast, the Standard Repayment Plan doesn’t calculate your monthly payments based on your income. Instead, it gives you a fixed monthly payment based on a 10-year repayment term (or a 10- to 30-year term for Direct Consolidation Loans). By making this payment each month, you’ll pay off your full balance at the end of your term. The minimum payment on the Standard Plan is $50.
Federal student loans automatically go on Standard Repayment unless you apply for an alternative. If you prefer an income-driven plan, you can apply for it on the Federal Student Aid website.
Types of Income-Driven Repayment Plans
There are currently three income-driven repayment plans open to borrowers: Income-Based Repayment, Income-Contingent Repayment, and Pay As You Earn. The SAVE plan is no longer available, and a new plan called the Repayment Assistance Plan will be introduced in the summer of 2026. Here’s a closer look at each plan.
Pay As You Earn Repayment Plan (PAYE)
PAYE is currently available to borrowers, but it’s set to close and won’t be accepting new enrollments on or after July 1, 2027. Since PAYE will be shutting down, you’ll have until July 1, 2028 to switch to Income-Based Repayment or the new Repayment Assistance Plan.
To qualify for PAYE, you must be a new borrower as of October 1, 2007 and have received a Direct loan disbursement on or after October 1, 2011. Plus, you’re only eligible if your monthly payment on PAYE is less than what it would be on the Standard 10-year plan.
PAYE sets your monthly payments to 10% of your discretionary income and extends your loan terms to 20 years. Find out more about how PAYE compares to REPAYE (which is now closed).
Income-Based Repayment Plan (IBR)
While most of the current income-driven repayment plans will close in the coming years, IBR will remain open and available to current borrowers. If you’re currently on SAVE, PAYE, or ICR, you have the option of switching to IBR when (or before) your plan gets shut down.
On Income-Based Repayment, you’ll pay 10% of your discretionary income each month on a 20-year term if you first borrowed after July 1, 2014. If you borrowed before that date, your monthly payment percentage will be 15% and your repayment term will be 25 years.
IBR will forgive your remaining balance if you still owe money at the end of your term (after the Department of Education finishes updating its systems). PAYE and ICR no longer offer loan forgiveness, but you can get credit for your PAYE and ICR payments if you switch to IBR.
Income-Contingent Repayment Plan (ICR)
The Income-Contingent Repayment plan is the only income-driven option for borrowers with Parent PLUS loans (and you have to consolidate first). It sets your payments to 20% of your discretionary income and has a repayment term of 25 years. Note that the discretionary income calculation for ICR is different (and less generous) than the one used for the other income-driven plans.
Similar to PAYE, the deadline to enroll in ICR is July 1, 2027, and you have until July 1, 2028 to switch to IBR or RAP. Otherwise, you’ll automatically be moved to RAP. If you’re a parent borrower, you may want to enroll in ICR while you still can. Parent loans are not eligible for RAP, so you won’t have an income-driven repayment option if you miss the ICR enrollment deadline.
Income-Sensitive Repayment Plan
The Income-Sensitive Repayment plan is open to low-income FFEL borrowers. Direct loans, which replaced FFEL loans in 2010, are not eligible. On Income-Sensitive Repayment, your monthly payments will increase or decrease based on your annual income. You’ll make payments on your loans for up to 10 years.
SAVE Plan (Saving on a Valuable Education)
The SAVE plan is no longer available, but some SAVE borrowers remain in limbo as they wait to see what’s next for their student loans. Introduced by the Biden administration in 2023, the SAVE plan offered lower monthly payments and faster loan forgiveness than the other income-driven options.
It was struck down by legal challenges from Republican-led states, and SAVE borrowers were placed in an interest-free forbearance starting in the summer of 2024. Interest started accruing again on August 1, 2025, and the DOE is encouraging borrowers to switch to an alternative plan.
However, some SAVE borrowers are waiting it out to extend their forbearance as long as possible. Those who don’t make a move may end up in IBR and see their payments resume in mid-2026. SAVE will be eliminated completely by June 30, 2028.
RAP Plan (new Repayment Assistance Program)
The Trump administration’s “One Big Beautiful Bill” created the RAP program and will implement it starting in the summer of 2026. Existing borrowers will be able to access RAP or IBR, while new borrowers as of July 1, 2026 will only have RAP or the new Standard Repayment Plan.
While the existing IDR plans use discretionary income, the new RAP will base your payments on your adjusted gross income (AGI). Depending on your income, you’ll pay 1% to 10% of your AGI over a term that spans up to 30 years.
If you still owe money after 30 years, the rest will be forgiven. The government will cover unpaid interest from month to month, as well as make sure your loan’s principal goes down by at least $50 each month.
All borrowers are required to pay at least $10 per month on RAP. This plan may offer lower monthly payments than the current IDR options, but you could also pay more interest over the life of the loan due to the longer repayment term.
How Income-Based Student Loan Repayment Works
In general, borrowers qualify for lower monthly loan payments if their total student loan debt at graduation exceeds their annual income.
To figure out if you qualify for a plan, you must apply at StudentAid.gov and submit information to have your income certified. The monthly payment on your income-driven repayment plan will then be calculated. If you qualify, you’ll make your monthly payments to your loan servicer under your new income-based repayment plan.
You’ll generally have to recertify your income and family size every year or allow the DOE to access your tax information and recertify for you. Your calculated income-based payment may change as your income or family size changes.
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Pros and Cons of Income-Driven Repayment
Pros
• Borrowers gain more affordable student loan payments.
• Any remaining student loan balance is forgiven after 20 or 25 years of repayment on the Income-Based Repayment plan.
• An economic hardship deferment period counts toward the 20 or 25 years.
• The plans provide forgiveness of any balance after 10 years for borrowers who meet all the qualifications of the Public Service Loan Forgiveness (PSLF) program.
• The government pays all or part of the accrued interest on some loans in some of the income-driven plans for a period of time.
• Low-income borrowers may qualify for payments of zero dollars, and payments of zero still count toward loan forgiveness. On the new RAP option, the minimum monthly payment will be $10.
• The IBR plan and new RAP plan offer some interest benefits if your monthly payments don’t cover your full interest charges.
Cons
• Stretching payments over a longer period means paying more interest over time.
• Forgiven amounts of student loans are free from federal taxation through 2025, but usually the IRS treats forgiven balances as taxable income (except for the PSLF program).
• Borrowers in most income-based repayment plans need to recertify income and family size every year.
• If a borrower gets married and files taxes jointly, the combined income could increase loan payments.
• The system can be confusing to navigate, especially with all the legal challenges and recent legislation.
Other Student Loan Repayment Options
If you’re wondering, “Is an income-driven plan good for me?” consider the fact that income-driven repayment plans aren’t your only option for paying back student loans. Here are a few alternatives that are currently available.
Standard Repayment Plan
The Standard Repayment Plan involves fixed monthly payments over 10 years. Starting in the summer of 2026, the new Standard Plan will have fixed payments over a term that’s based on your loan amount. Your term will be 10 years if you owe less than $25,000 and go up to 25 years for balances over $100,000.
Graduated Repayment Plan
The Graduated Repayment Plan spans 10 years for most loans, but it can go from 10 to 30 years for consolidation loans. On Graduated Repayment, your monthly payments start out low and increase every two years. Like the current Standard Plan, you’ll be out of debt at the end of your term. However, you’ll end up paying more interest on this graduated plan. Graduated Repayment may be a good fit for borrowers whose income is low starting out but expect it to increase over time.
Extended Repayment Plan
Extended Repayment gives you 25 years to pay back your loans, but you must owe more than $30,000 and have borrowed after October 7, 1998. You can choose fixed payments or graduated payments. Unlike IBR, there’s no loan forgiveness at the end of the Extended Plan. Your monthly payments will go down when you extend your term, but you’ll pay more interest overall.
How to Qualify for Income-Driven Repayment
You can apply for income-driven repayment on the Federal Student Aid website. The process typically takes about 10 minutes. Here’s more on how to change your student loan repayment plan to an income-driven one.
Required Documentation
When you apply for an IDR plan, you can upload documentation verifying your income or allow the DOE to access your tax information and import it into your application. Along with sharing your income, you’ll need to provide your mailing address, phone number, and email. If you’re married, you’ll also provide your spouse’s financial information.
Annual Recertification Process
Every year, you have to recertify, or update, your income and family size so your loan servicer can adjust your monthly payments accordingly. This recertification is required even if your income or family size hasn’t changed.
If you fail to recertify your plan, your servicer will no longer base your payments on your income. Instead, you’ll pay the amount you would on the standard 10-year plan. If you fail to recertify IBR, you’ll have the added consequence of interest capitalization, meaning your interest charges will be added to the principal balance of your loan.
You can recertify your plan on the Federal Student Aid website by uploading documentation of your income. Alternatively, you can allow the DOE to access your federal tax information and automatically recertify your plan for you.
If you don’t give your consent for this (or aren’t eligible for auto-recertification), you’ll have to manually recertify your plan each year.
The Takeaway
Income-driven repayment can offer relief if you’re struggling to afford your monthly payments. These plans adjust your monthly student loans bills based on your income while giving you a lot more time to pay back your debt. Plus, income-driven plans (and the current Standard Plan) are the only plans that qualify for PSLF. A downside of IDR plans, however, is that you’ll likely pay more interest with an extended term.
Your options for IDR will also be changing due to recent legislation from the Trump administration. Most of the current plans will be shut down, leaving only Income-Based Repayment for current borrowers or the new Repayment Assistance Plan. For those who borrow after July 1, 2026, the only income-driven plan option will be the Repayment Assistance Plan. Staying informed about these changes will help you decide which income-driven repayment plan is best for you.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
FAQ
Is income-based repayment a good idea?
For borrowers of federal student loans with high monthly payments relative to their income, income-based repayment can be a good idea. Just be aware that your options will be changing in the coming years.
What is the income limit for income-based student loan repayment?
Some income-driven repayment plans require that your monthly payments be less than on the standard 10-year plan. You’ll generally meet this guideline if your student loan debt is higher than your discretionary income or makes up a big portion of your income.
What are the advantages and disadvantages of income-based student loan repayment?
The main advantage is lowering your monthly payments, with the promise of eventual loan forgiveness on the IBR plan if all the rules are followed. Plus, income-driven plans are essentially the only ones that qualify for PSLF. A disadvantage is that you have to wait for 20 or 25 years depending on the plan you’re on and how much you owe. You’ll likely also pay more interest on this longer term.
How does income-based repayment differ from standard repayment?
With the standard repayment plan, your monthly payments are a fixed amount that ensures your student loans will be repaid within 10 years. Under this plan, you’ll generally save money over time because your monthly payments will be higher. With income-driven repayment, your monthly loan payments are based on your income and family size. These plans are designed to make your payments more affordable. If you still owe a balance after 20 or 25 years on IBR, the remaining amount is forgiven.
Who is eligible for income-based repayment plans?
With the PAYE and IBR plans, in order to be eligible, your calculated monthly payments, based on your income and family size, must be less than what you would pay under the standard repayment plan. Under the ICR plan, any borrower with eligible student loans may qualify. Parent PLUS loan borrowers are also eligible for this plan if they consolidate their parent loans first.
How is the monthly payment amount calculated in income-based repayment plans?
With income-based repayment, your monthly payment is calculated using your income and family size. Your payment is based on your discretionary income, which is the difference between your gross income and an income level based on the poverty line. The income level is different depending on the plan. For IBR, your monthly payment is 10% or 15% of your discretionary income, depending on when you borrowed.
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