The Four Main Income-Driven Repayment Plans

The U.S. Department of Education currently offers four income-driven repayment plans. While they share the same core logic, they differ in payment percentages, eligibility, and how long you repay before forgiveness.

  • SAVE (Saving on a Valuable Education): The newest plan, which replaced REPAYE. It calculates discretionary income more generously than older plans and caps undergraduate loan payments at 5% of discretionary income. Graduate loans are capped at 10%, and borrowers with mixed debt pay a weighted amount between the two.
  • PAYE (Pay As You Earn): Caps payments at 10% of discretionary income with a 20-year repayment timeline for most borrowers. Only available to newer borrowers who had no federal loan balance before October 2007 and received a Direct Loan after October 2011.
  • IBR (Income-Based Repayment): Available to a broader group of borrowers. Payments are capped at 10% of discretionary income for newer borrowers or 15% for those who borrowed before July 2014. Forgiveness occurs after 20 or 25 years depending on when you borrowed.
  • ICR (Income-Contingent Repayment): The oldest IDR plan, with payments capped at 20% of discretionary income or what you'd pay on a 12-year fixed plan, whichever is lower. It's the only IDR plan available to borrowers with Parent PLUS Loans who have consolidated.

Given the complexity of choosing between these plans, the full debt repayment roadmap for young adults offers broader context for fitting IDR into your financial picture.

How Payments Are Actually Calculated

The phrase "percentage of discretionary income" sounds simple, but the calculation has several moving parts. Here's how it breaks down:

  1. Start with your Adjusted Gross Income (AGI): This is your gross income minus certain deductions, found on your federal tax return or estimated if your income has changed.
  2. Find the federal poverty guideline for your state and family size: The Department of Health and Human Services publishes these annually. Your plan multiplies this figure by a set percentage (typically 100%, 150%, or 225% depending on the plan).
  3. Subtract that result from your AGI: What remains is your discretionary income. Your monthly payment is a fixed percentage of that amount divided by 12.

For example, under SAVE, a single borrower earning $40,000 per year might have a discretionary income well below $20,000 after the poverty guideline deduction is applied, resulting in a monthly payment that may be a fraction of what a standard 10-year plan would charge.

~8 million

Borrowers enrolled in IDR plans

According to U.S. Department of Education data, approximately 8 million federal student loan borrowers were enrolled in an income-driven repayment plan as of recent reporting periods.

5%–20%

Range of discretionary income payment caps across IDR plans

The percentage of discretionary income charged varies by plan: SAVE charges as low as 5% for undergraduate loans, while ICR charges up to 20%.

20–25 years

Repayment period before loan forgiveness

Depending on the IDR plan and loan type, borrowers who make consistent qualifying payments may have remaining balances forgiven after 20 or 25 years.

If your income is very low, your calculated payment could be $0—and that still counts as a qualifying payment toward forgiveness. This is a meaningful protection for borrowers in early-career or lower-wage roles.

Enrollment, Recertification, and Common Pitfalls

Applying for an IDR plan is free and done through studentaid.gov. You'll need to link to your tax data or manually enter income information. Your loan servicer will then confirm your eligibility and assign a payment amount.

Use the Loan Simulator Before You Choose

The federal government's Loan Simulator at studentaid.gov lets you compare estimated monthly payments across every repayment plan using your actual loan and income data. Run the simulation before enrolling to see which plan minimizes short-term payments, long-term cost, or both—depending on your priorities.

The most common mistake borrowers make is missing the annual recertification deadline. If you don't recertify, your servicer may place you on a standard repayment plan, potentially increasing your payment significantly. Set a calendar reminder well before your recertification date each year.

It's also worth understanding that IDR plans aren't automatically the lowest-cost option over time. Because payments are lower, interest can accrue more slowly or remain unpaid each month, potentially increasing your total balance before it's forgiven. Borrowers with higher incomes or relatively small debt loads may pay less overall on a standard 10-year plan. See the real cost of high-interest debt over time for context on how interest accrual compounds your total obligation.

IDR plans make the most sense when your debt is high relative to your income, when you're pursuing Public Service Loan Forgiveness, or when short-term cash flow is genuinely strained. For a structured way to evaluate whether your current approach is serving you, the signs your repayment plan isn't working can help you identify warning flags early.

This article is for general informational and educational purposes only and does not constitute financial, tax, or legal advice. Federal student loan policies and tax rules change over time. Consult a qualified financial professional or visit studentaid.gov for guidance specific to your situation.