What Is Income-Driven Repayment for Student Loans?

Income-driven repayment (IDR) plans set your federal student loan payment as a percentage of your discretionary income — usually 5-20% — rather than a fixed amount based on what you borrowed. If your income is low enough, your payment could be $0/month.

The Main IDR Plans

• SAVE (Saving on a Valuable Education): newest plan, 5% of discretionary income for undergrad loans, interest subsidy prevents balance growth when payments are made
• PAYE (Pay As You Earn): 10% of discretionary income, forgiveness after 20 years
• IBR (Income-Based Repayment): 10-15% of discretionary income, forgiveness after 20-25 years
• ICR (Income-Contingent Repayment): 20% of discretionary income, 25-year forgiveness

How Discretionary Income Is Calculated

Discretionary income = your Adjusted Gross Income (AGI) minus 225% of the federal poverty guideline for your family size. For a single person in 2024, 225% of the poverty line is about $32,800. If you earn $45,000, your discretionary income is $12,200. At 5% (SAVE plan), your annual payment is $610, or about $51/month.

Loan Forgiveness Under IDR

After 20-25 years of qualifying payments, your remaining balance is forgiven. Important notes:

• Forgiven amounts are currently taxable as income (exception: Public Service Loan Forgiveness is tax-free)
• You must recertify your income and family size each year
• Missed payments or periods of non-enrollment don't count toward forgiveness

Public Service Loan Forgiveness (PSLF)

If you work for a government agency or qualifying nonprofit, PSLF forgives your remaining balance after just 10 years (120 qualifying payments) — tax-free. You must be on an IDR plan. This is one of the most valuable student loan benefits available and is separate from standard IDR forgiveness.

How to Apply for IDR

1. 1Go to studentaid.gov and log in with your FSA ID
2. 2Use the Loan Simulator to compare plans
3. 3Apply for your chosen plan — you'll need to provide income information
4. 4Recertify your income annually to keep your payment accurate

When IDR Is NOT the Best Choice

If you can afford standard payments and your loan balance is manageable relative to your income, paying aggressively on the standard 10-year plan saves thousands in interest. IDR is most valuable when your balance is very high relative to income, or when you're pursuing PSLF.