Income Driven Student Loan Repayment | IDR Plans and Eligibility

Income-driven repayment (IDR) plans are designed to make federal student loan repayment more manageable by basing your monthly payments on your income and family size.

Here’s a breakdown of key information:

Core Concepts:

• Payment Calculation:
  • IDR plans calculate your monthly payment as a percentage of your discretionary income. This means your payments adjust based on your earnings.
  • “Discretionary income” is generally defined as the difference between your adjusted gross income (AGI) and a certain percentage of the poverty guideline for your family size.
• Loan Forgiveness:
  • After a certain number of qualifying payments, any remaining loan balance may be forgiven. The length of this period varies depending on the specific IDR plan.
• Federal Student Loans:
  • IDR plans are exclusively for federal student loans. Private student loans are not eligible.

Types of IDR Plans:

• Saving on a Valuable Education (SAVE) Plan:
  • This is the newest IDR plan, replacing the Revised Pay As You Earn (REPAYE) Plan.
  • It offers lower monthly payments compared to other IDR plans.
  • It also has an interest benefit, preventing your loan balance from growing due to unpaid interest.
• Income-Based Repayment (IBR) Plan:
  • This plan caps your monthly payments at a percentage of your discretionary income.
  • The percentage varies depending on when you received your loans.
• Pay As You Earn (PAYE) Plan:
  • This plan is available to borrowers with newer federal loans.
  • It caps monthly payments at 10% of your discretionary income.
• Income-Contingent Repayment (ICR) Plan:
  • This plan has the fewest eligibility requirements.
  • It caps monthly payments at the lesser of 20% of your discretionary income or what you would pay on a fixed repayment plan over 12 years, adjusted for income.

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Key Considerations:

• Eligibility:
  • Eligibility requirements vary depending on the specific IDR plan.
• Annual Recertification:
  • You must recertify your income and family size annually to stay enrolled in an IDR plan.
• Loan Forgiveness and Taxes:
  • While IDR plans offer loan forgiveness, the forgiven amount may be considered taxable income.
• Where to get more information:
  • The best place to get detailed and current information is the official Federal Student Aid website: studentaid.gov.