Income-Driven Repayment Plans: How Federal Student Loan Options Compare
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In this article
A side-by-side look at IBR, PAYE, SAVE, and ICR — what each plan calculates, who qualifies, and how forgiveness timelines differ.
Key Takeaways
- IBR, PAYE, SAVE, and ICR each calculate payments differently based on discretionary income and family size.
- Forgiveness timelines range from 10 to 25 years depending on the plan and loan type.
- Not all federal loans qualify for every income-driven repayment plan — eligibility varies.
- Enrolling in an IDR plan does not automatically enroll you in Public Service Loan Forgiveness.
- Tax treatment of forgiven balances can vary; consult a qualified financial or tax professional.
What Income-Driven Repayment Means
Income-driven repayment (IDR) is an umbrella term for federal student loan repayment plans that tie your monthly payment to your income and family size rather than your total debt. Because payments adjust with your earnings, these plans can make repayment manageable when your salary is low relative to what you borrowed.
Before comparing plans, two terms are worth defining. Discretionary income is the amount by which your adjusted gross income (AGI) exceeds a set percentage of the federal poverty guideline for your family size — the exact threshold differs by plan. Forgiveness refers to cancellation of any remaining balance after you have made the required number of qualifying payments.
If you are still sorting out which types of loans you hold, see our guide to subsidized vs. unsubsidized federal loans — loan type affects which IDR plans you can access.
| IBR (New Borrowers) | IBR (Original) | PAYE | SAVE | ICR | |
|---|---|---|---|---|---|
| Payment cap (% discretionary income) | 10% | 15% | 10% | 5–10% (loan mix) | 20% or 12-yr fixed equivalent |
| Poverty guideline threshold | 150% | 150% | 150% | 225% | 100% |
| Forgiveness timeline | 20 years | 25 years | 20 years | 20–25 years | 25 years |
| New borrower date required | On/after July 1, 2014 | Before July 1, 2014 | On/after Oct 1, 2007 | None | None |
| Eligible loan types | Direct, FFEL | Direct, FFEL | Direct Loans only | Direct Loans only | Direct Consolidation |
| Interest capitalization rule | On leaving IBR | On leaving IBR | On leaving PAYE | Does not capitalize while enrolled | On leaving ICR |
The Four Plans Explained
SAVE (Saving on a Valuable Education)
SAVE replaced the former REPAYE plan. It calculates discretionary income using 225% of the federal poverty guideline — the most generous threshold of any IDR plan — and caps payments at 5% of that amount for undergraduate loans. Graduate loan portions are capped at 10%, with a weighted blend for mixed borrowers. Unpaid interest does not capitalize as long as you stay enrolled, preventing balance growth.
IBR (Income-Based Repayment)
IBR has two versions. Borrowers who were new federal loan borrowers on or after July 1, 2014, pay 10% of discretionary income (calculated at 150% of the poverty guideline) with forgiveness after 20 years. Borrowers who do not meet that cutoff pay 15% with forgiveness after 25 years. IBR is available for Direct Loans and most FFEL Program loans.
PAYE (Pay As You Earn)
PAYE caps payments at 10% of discretionary income (150% poverty threshold) and offers forgiveness after 20 years. Eligibility requires that you be a new borrower as of October 1, 2007, and have received a Direct Loan disbursement on or after October 1, 2011. Payments are also capped — they will never exceed what you would pay under the 10-year Standard plan.
ICR (Income-Contingent Repayment)
ICR is the oldest IDR plan and generally the least favorable in terms of payment size, but it is the only option for Parent PLUS loan holders who have consolidated into a Direct Consolidation Loan. It calculates payments as the lesser of 20% of discretionary income (using 100% of the poverty guideline) or the amount you would pay on a 12-year fixed plan. Forgiveness occurs after 25 years.
Recertify Income Every Year
All IDR plans require annual income and family-size recertification. Set a calendar reminder at least 60 days before your recertification deadline. Missing it can temporarily spike your payment and, on some plans, trigger interest capitalization — meaning unpaid interest gets added to your principal balance and begins accruing additional interest.
Forgiveness, Enrollment, and Things to Watch
Forgiveness under IDR plans is not automatic — you must submit income documentation every year to recertify and remain enrolled. Missing recertification can cause your payment to revert to the Standard 10-year amount and may allow unpaid interest to capitalize depending on your plan.
IDR plans are separate from Public Service Loan Forgiveness (PSLF), which offers forgiveness after 120 qualifying payments while working for an eligible government or nonprofit employer. PSLF forgiveness is currently tax-free at the federal level. IDR forgiveness timelines are longer, and tax treatment of the forgiven amount may differ — speak with a qualified tax professional about potential tax liability before counting on IDR forgiveness as a strategy.
For borrowers weighing IDR alongside other debt obligations, the frameworks discussed in our guide to prioritizing high- vs. low-interest debt can help you see where student loans fit in your broader financial picture.
The U.S. Department of Education's Loan Simulator (studentaid.gov) allows you to model estimated payments under each plan using your actual loan data. Because IDR policy has been subject to legal challenges and regulatory updates, always verify current plan availability and terms directly through studentaid.gov or by contacting your loan servicer.
This article is for general informational and educational purposes only and does not constitute financial, tax, or legal advice. Federal student loan rules change frequently; verify current plan terms and eligibility with the U.S. Department of Education or a qualified professional before making repayment decisions.
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Education & Learning Editorial Team
Education & Learning Editorial Team is the collective byline for our editorial team and contributor network. Articles published under this byline or an editorial pen name are researched, written, and reviewed according to our editorial standards for clarity, consistency, and independence before publication.
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