IDR (Income-Driven Repayment) plans
Also known as: Income-Driven Repayment, IBR, PAYE, SAVE plan
Federal student loan repayment plans capping monthly payments at a percentage of discretionary income, with forgiveness of remaining balance after 20-25 years. Required vehicle for Public Service Loan Forgiveness.
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Income-Driven Repayment is the umbrella term for several federal student loan repayment plans that calculate the monthly payment as a percentage of the borrower's discretionary income, defined as the portion of income above 150% to 225% of the federal poverty line depending on the specific plan. The plans were created to make federal student loan payments affordable for borrowers whose income is low relative to their debt balance. The IDR plans include Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Income-Contingent Repayment (ICR), plus the new Repayment Assistance Plan (RAP); the SAVE (Saving on a Valuable Education) plan introduced in 2023 was wound down in 2026 after litigation and is no longer open to new enrollment.
Each plan has slightly different parameters: the percentage of discretionary income applied (typically 5-10%), the maximum repayment term before remaining balance is forgiven (20 years for undergraduate-origin loans, 25 years for graduate-origin loans, or 10 years under PSLF), and the interest-subsidy treatment (some plans subsidize unpaid interest, others let it accrue). The Department of Education's Loan Simulator at studentaid.gov compares the monthly payment under each plan for a specific borrower's profile, enabling the household to pick the most favorable. For most borrowers with substantial federal loan balances and moderate income, IDR enrollment produces dramatically lower monthly payments than the standard 10-year repayment.
IDR plans are the required vehicle for Public Service Loan Forgiveness (PSLF). A borrower pursuing PSLF must be enrolled in an IDR plan, employed full-time at a qualifying public-service employer, and making qualifying monthly payments for 120 months (10 years) before the remaining balance is forgiven tax-free. The interaction is that PSLF makes the lower IDR payments work to the borrower's advantage — the lower the IDR payment, the more federal balance is forgiven at the 10-year mark. For PSLF-eligible borrowers, the optimal strategy is typically the lowest-payment IDR plan available.
The SAVE plan introduced in 2023 was the most generous IDR plan to date, capping payments at 5% of discretionary income for undergraduate-origin loans (versus 10-15% under prior plans) and increasing the income exemption threshold to 225% of the poverty line. SAVE faced legal challenges in 2024-2025 and was wound down in 2026, with the Department of Education transitioning affected borrowers to other plans and the new Repayment Assistance Plan (RAP) taking its place. Borrowers formerly enrolled in SAVE should confirm their current plan at studentaid.gov; new borrowers should consider IBR, PAYE, or RAP. Refinancing federal loans into private loans permanently extinguishes IDR eligibility and PSLF eligibility — a typically negative move for federal-loan borrowers with significant balances or potential PSLF qualifying employment.
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- PSLF (Public Service Loan Forgiveness) Public Service Loan Forgiveness is a US federal program that forgives the remaining balance on Direct federal student loans after 120 qualifying monthly payments made while employed full-time by a qualifying public-service employer.
- SAVE Plan A federal student loan income-driven repayment plan enacted in 2023 to replace REPAYE. Uses 5% of discretionary income for undergraduate loans (10% for graduate) and a more generous discretionary income definition (225% of federal poverty level). Subject to ongoing court litigation.
- Refinance Replacing an existing loan with a new one — typically to lower the rate, change the term, switch from variable to fixed rate, or extract equity (cash-out refinance). Subject to closing costs that must be recouped through the rate savings to make the refi worthwhile.
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