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Income-driven repayment (IDR) plans allow federal student loan borrowers to reduce their monthly payment based on their income and family size. These plans also extend the repayment term, and any remaining balance at the end is generally forgiven.
Depending on your loans and when you borrowed them, you may be able to choose from a few different IDR plans. The landscape has shifted, though, as a 2025 law phased out several IDR plans and replaced them with a single new option that became effective July 1, 2026. Here's what you need to know.
How Income-Driven Repayment Plans Work
An income-driven repayment plan sets your monthly federal student loan payment to an amount based on what you earn rather than what you owe. On legacy plans, your payment will be 10%, 15% or 20% of your discretionary income, which is calculated using your household income, family size and state of residence.
On the new Repayment Assistance Plan (RAP), your payment may be anywhere from 1% to 10% of your adjusted gross income.
These plans also extend your repayment term from 10 years with the standard repayment plan to up to 30 years. If you still have a balance left at the end of the repayment period, the remainder is forgiven. Here are a few other key things to know about IDR plans:
- They're for federal loans only. Private student loans don't qualify, though some private lenders offer their own hardship options.
- You'll recertify yearly. Each year, you'll update your income and family size so your payment can be recalculated. If you give the Department of Education permission to access your federal tax information and you're eligible, this can happen automatically. Otherwise, you'll need to recertify yourself.
- Forgiven balances may be taxed. Loan amounts forgiven through an IDR plan are generally treated as taxable income at the federal level.
Types of Income-Driven Repayment Plans
If any of your federal student loans are first disbursed on or after July 1, 2026—and that includes direct consolidation loans—your only repayment options are RAP and a new tiered standard repayment plan.
However, borrowers with only loans disbursed prior to that date may still access legacy IDR plans, though some will be phased out entirely in 2028. Here's a look at how each plan works.
Repayment Assistance Plan
The RAP sets monthly payments at 1% to 10% of your adjusted gross income, with a $10 minimum payment, a $50 reduction for each dependent in your household and forgiveness after 30 years.
It also includes two features designed to keep your balance from growing:
- If your monthly payment doesn't cover the interest that accrued, the unpaid interest is waived.
- If your payment reduces your principal by less than $50 in a given month, the Department of Education covers the difference, so your principal goes down by at least $50.
Tiered Standard Plan
The tiered standard plan has a fixed monthly payment with a term based on your total loan balance:
- 10 years for balances under $25,000
- 15 years for balances of $25,000 to $49,999
- 20 years for balances of $50,000 to $99,999
- 25 years for balances of $100,000 or more
Income-Based Repayment (IBR) Plan
The IBR plan caps your payment at a percentage of your discretionary income, with different terms depending on when you borrowed. If you got your first loan before July 1, 2014, payments are capped at 15% of discretionary income, with forgiveness after 25 years. If you got your first loan on or after that date, payments are capped at 10%, with forgiveness after 20 years.
Discretionary income is calculated as the difference between your annual income and 150% of the federal poverty guideline for your state and family size.
Note: In the past, your IBR payment had to be lower than what you'd pay under the standard 10-year repayment plan to qualify. The OBBBA removed that requirement, so any eligible borrower can now enroll regardless of income.
Pay as You Earn (PAYE) Plan
The PAYE plan sets payments at 10% of your discretionary income—calculated the same way as the IBR plan—with forgiveness after 20 years. To qualify for the plan, your new payment can't be more than the standard 10-year plan.
You also need to have received a direct loan disbursement on or after October 1, 2011, and not had a federal student loan balance before October 1, 2007.
Income-Contingent Repayment (ICR) Plan
The ICR plan sets your monthly payment at the lesser of 20% of your discretionary income—your annual income minus 100% of the federal poverty guideline—or what you'd pay on a fixed 12-year plan adjusted for your income. The repayment term is 25 years, after which the remaining balance is forgiven.
There's no income requirement to enroll. ICR is historically the only IDR plan available to parents who took out parent PLUS loans who consolidated into a direct consolidation loan.
Note: The Saving on a Valuable Education (SAVE), which was created by the Biden administration, was struck down by a federal appeals court in March 2026. Borrowers enrolled in SAVE will need to switch to another repayment plan within 90 days of July 1, 2026, or risk being moved into a different plan by their servicer.
PAYE and ICR Are Being Phased Out
PAYE and ICR are closing permanently on July 1, 2028. Until then, eligible borrowers can still enroll, but anyone in PAYE or ICR will need to switch to IBR, RAP or the tiered standard plan before that date.
If you don't choose a plan, your servicer will move you into the RAP automatically. IBR will remain available indefinitely for borrowers whose loans were disbursed before July 1, 2026.
Parents with parent PLUS loans who consolidated their loans prior to July 1, 2026, can choose the ICR plan, and they can even switch to the IBR plan after making at least one payment before July 1, 2028. However, parents who didn't consolidate their loans before that deadline will only be able to access the tiered standard plan.
Who Is Eligible for an Income-Driven Repayment Plan?
Eligibility for IDR depends on the plan and the types of loans you have. In general, here's what to know:
- You need federal loans. As previously mentioned, only federal student loans qualify; private loans aren't eligible.
- Some loans must be consolidated first. Federal Family Education Loan (FFEL) program loans, federal Stafford loans and Perkins loans must be consolidated into a direct consolidation loan before they can enter certain IDR plans.
- PAYE has an income test. You generally must have a partial financial hardship to qualify, meaning your PAYE payment would be lower than your standard plan payment.
If you're unsure whether you qualify, use the federal student loan simulator or contact your loan servicer.
Pros and Cons of Income-Driven Repayment Plans
Getting on an income-driven repayment plan can provide relief for struggling federal student loan borrowers, but it's not always the best option in the long run. Here are some advantages and disadvantages to consider before you apply.
Pros
It provides immediate relief. If you're experiencing financial hardship now, an income-driven repayment plan can provide an immediate reduction of your monthly payment and relieve some of the pressure on your budget.
It can help you avoid default. Student loan default can have a significant negative impact on your credit history and financial wellness. By decreasing your monthly payments, you can avoid missed payments and default.
It can eventually result in forgiveness. Depending on your future income, you may be able to keep a low payment and get forgiveness once you've reached the end of your repayment term.
Cons
You need to recertify every year. Each year, you're required to recertify your income and family size. If your income grows or you forget to recertify, your monthly payment may increase or you may even lose access to your IDR plan. But if you've consented to automatic recertification and qualify, the Department of Education can handle it for you.
You may pay more interest. With lower monthly payments, less of what you pay goes toward paying down the principal balance of your loans, which means more interest over time. Under IBR, PAYE and ICR, your balance may even grow if your payment doesn't cover the accrued interest, though RAP includes an interest subsidy that prevents this.
You may not qualify for the plan you want. Depending on which type of loans you have and your financial situation, you may not be able to get on the income-driven plan you want.
How to Apply for Income-Driven Repayment
Whether you're planning to apply for an income-driven repayment plan or you're just thinking about it, here's how to go through the process:
- Visit the Federal Student Aid website to apply online or download the paper application form.
- Provide your name, Social Security number, address and contact information.
- Choose a plan that you're eligible for.
- Share information about your family size, marital status and, if applicable, information about your spouse.
- Provide income information and include documentation, which may include a pay stub, a tax return or a tax transcript.
- Finish answering the remaining questions and sign the application, then submit it directly to your loan servicer.
Note that if you have multiple federal loan servicers, you'll need to submit a separate application to each one.
The Bottom Line
Whether or not you choose to get on an income-driven repayment plan, it's important to make your student loan payments on time every month. If you're late by 30 days or more, the late payment may get reported to the credit reporting agencies, which could damage your credit score.
As you make payments on your student loans and take other steps to build your credit, use Experian's free credit monitoring service to track your progress and address potential problems as they arise.