What Is Income-Driven Repayment (IDR)? Plans, Payments, and Forgiveness
Last updated 04/10/2026 by
Ante Mazalin
Edited by
Andrew Latham
Summary:
Income-driven repayment (IDR) is a category of federal student loan repayment plans that set your monthly payment as a percentage of your discretionary income — rather than a fixed amount based on your loan balance — and forgive the remaining balance after 20 or 25 years of qualifying payments.
The four active IDR plans differ in their payment formulas and eligibility.
- SAVE (Saving on a Valuable Education): The newest IDR plan, replacing REPAYE — sets payments at 5% of discretionary income for undergraduate loans and 10% for graduate loans. Offers the lowest payments for most borrowers when available.
- PAYE (Pay As You Earn): Caps payments at 10% of discretionary income; forgiveness after 20 years. Available only to borrowers who took their first loan after October 1, 2007 and received a disbursement after October 1, 2011.
- IBR (Income-Based Repayment): 10% of discretionary income for new borrowers (after July 2014); 15% for older borrowers. Forgiveness after 20 years (new borrowers) or 25 years (older borrowers). The broadest eligibility of all IDR plans.
- ICR (Income-Contingent Repayment): 20% of discretionary income or what you’d pay on a 12-year fixed plan — whichever is less. Forgiveness after 25 years. The only IDR plan available to Parent PLUS borrowers (after consolidation).
IDR plans are the primary tool the federal government offers to make student loan payments manageable when income doesn’t support standard repayment amounts.
For borrowers in certain careers, IDR also unlocks the path to Public Service Loan Forgiveness — since PSLF requires enrollment in a qualifying IDR plan.
Choosing the right IDR plan comes down to three variables: when you first borrowed, what types of loans you have, and whether your goal is the lowest monthly payment or the fastest forgiveness timeline.
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IDR Plan Comparison
| Plan | Monthly Payment | Forgiveness After | Eligibility Requirement | Eligible Loan Types |
|---|---|---|---|---|
| SAVE | 5% discretionary income (undergrad); 10% (grad); 0% if income below 225% of poverty line | 10 years (balances ≤$12K); 20–25 years otherwise | Any Direct Loan borrower (not Parent PLUS) | Direct Loans only |
| PAYE | 10% discretionary income (never more than 10-year standard payment) | 20 years | New borrower after Oct 1, 2007 with disbursement after Oct 1, 2011; partial financial hardship required | Direct Loans only |
| IBR (new) | 10% discretionary income (never more than 10-year standard payment) | 20 years | New borrower after July 1, 2014; partial financial hardship required | Direct Loans and FFEL |
| IBR (old) | 15% discretionary income (never more than 10-year standard payment) | 25 years | Borrowers who took loans before July 1, 2014; partial financial hardship required | Direct Loans and FFEL |
| ICR | 20% discretionary income or 12-year fixed equivalent — whichever is less | 25 years | Any Direct Loan borrower; only IDR option for Parent PLUS after consolidation | Direct Loans only (Parent PLUS must consolidate first) |
How Discretionary Income Is Calculated
Every IDR plan calculates payments based on “discretionary income” — but the definition varies by plan.
- SAVE: Discretionary income = Adjusted Gross Income (AGI) minus 225% of the federal poverty guideline for your family size
- PAYE and IBR: Discretionary income = AGI minus 150% of the federal poverty guideline
- ICR: Discretionary income = AGI minus 100% of the federal poverty guideline
For a single borrower with an AGI of $50,000 in 2025 (poverty guideline: $15,060), the calculation under IBR: $50,000 − (150% × $15,060) = $50,000 − $22,590 = $27,410 discretionary income. IBR payment = 10% × $27,410 ÷ 12 = approximately $228/month.
For a detailed calculation, use the Department of Education’s Loan Simulator at studentaid.gov. See also: how to calculate your monthly IDR payment.
Annual Recertification
IDR payments are not set permanently — you must recertify your income and family size every 12 months. Your servicer will send a reminder, but missing the deadline has consequences:
- Your payment reverts to the standard 10-year repayment amount until recertification is complete
- Any accrued interest may capitalize (be added to your principal balance) depending on the plan
- Missed recertification does not disqualify you from IDR permanently — you re-enroll and payments are recalculated
Set a calendar reminder 60 days before your annual recertification date. Your servicer’s online portal will show the exact deadline.
Pro Tip: If your income drops significantly — due to job loss, unpaid leave, or a career change — you can request an early income recertification without waiting for the annual deadline. Your servicer will recalculate your payment based on your current income immediately. This is one of the most underused features of IDR plans, and it can bring a payment to $0 during periods of hardship without pausing or entering forbearance (which doesn’t count toward forgiveness).
IDR and PSLF
Enrollment in a qualifying IDR plan is a prerequisite for Public Service Loan Forgiveness (PSLF). Payments made on the Standard 10-year plan also count toward PSLF — but since PSLF forgives after 10 years, a borrower who makes all standard 10-year payments would have zero balance left to forgive. Most PSLF borrowers use an IDR plan to keep payments low and ensure a balance remains at the 10-year mark.
Qualifying IDR plans for PSLF purposes: SAVE, PAYE, IBR (both versions), and ICR. Payments made in any of these plans while working for a qualifying employer count toward the 120 required for PSLF.
IDR Forgiveness: The Tax Question
Amounts forgiven under IDR plans — not PSLF — are generally treated as taxable income in the year of forgiveness. The American Rescue Plan Act (ARPA) made IDR forgiveness federally tax-free through December 31, 2025. After that, borrowers receiving IDR forgiveness may owe federal income tax on the forgiven amount.
A borrower with $80,000 forgiven in 2027 in the 22% federal bracket could owe approximately $17,600 in federal income tax in that year alone — in addition to any state tax. Borrowers on IDR plans with long timelines to forgiveness should plan for this potential liability. See student loan forgiveness for the full program comparison including tax treatment by program type.
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Key takeaways
- IDR plans cap federal student loan payments at 5–20% of discretionary income — significantly below standard repayment for borrowers with high debt relative to income.
- SAVE offers the lowest payments for most borrowers: 5% of discretionary income for undergraduate loans with a 225% poverty line income exclusion.
- IBR has the broadest eligibility, including FFEL loans — making it the right choice for borrowers with older loan types who can’t access Direct Loan-only plans.
- ICR is the only IDR plan available to Parent PLUS borrowers, but only after consolidating into a Direct Consolidation Loan.
- Annual recertification is required — missing it reverts your payment to the standard amount until you recertify.
- IDR forgiveness after 20–25 years may be taxable as income after 2025. PSLF forgiveness after 10 years is permanently tax-free.
Frequently Asked Questions
Which IDR plan has the lowest payment?
SAVE currently offers the lowest payments for most borrowers — particularly those with undergraduate debt — because it uses 5% of discretionary income (vs. 10% for PAYE and IBR) and excludes income up to 225% of the poverty line (vs. 150% for other plans).
For a borrower with only undergraduate loans, SAVE typically results in the smallest monthly payment of any IDR plan. For a detailed comparison using your own numbers, see the guide to income-driven repayment plans.
Can I switch between IDR plans?
Yes — you can change IDR plans at any time by contacting your servicer. Switching doesn’t reset your forgiveness clock in most cases, but payments made under one plan continue to count toward forgiveness under another.
The exception: switching from a plan mid-recertification period may affect the payment amount for the remainder of the period. Switching from PAYE to ICR, for example, changes the forgiveness timeline from 20 to 25 years.
What happens if my income increases significantly?
Your payment increases at your next recertification. Under PAYE and IBR, there is a payment cap — your payment will never exceed the 10-year standard repayment amount regardless of how high your income climbs.
Under SAVE and ICR, there is no such cap. If your income grows enough that the IDR payment exceeds the standard payment, you may be better served by switching to the standard plan and paying off the loan faster rather than extending toward 20–25-year forgiveness.
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