Income-Driven Repayment Plans Overview
Income-driven repayment (IDR) plans cap your federal student loan payments at a percentage of your discretionary income, making loans more affordable and offering forgiveness after 20-25 years.
Quick Comparison: All IDR Plans
| Feature | SAVE | PAYE | IBR | ICR |
|---|---|---|---|---|
| Payment % | 5-10% | 10% | 10-15% | 20% |
| Income basis | AGI - 225% FPL | AGI - 150% FPL | AGI - 150% FPL | AGI |
| Forgiveness | 20-25 years | 20 years | 20-25 years | 25 years |
| Undergrad balance under $12k | 10 years | N/A | N/A | N/A |
| Interest coverage | Yes | 50% | No | No |
| Marriage consideration | Separate if filing separately | Combined | Combined | Combined |
SAVE Plan (Saving on a Valuable Education)
The newest and most generous IDR plan, replacing REPAYE.
Key Features
| Feature | Details |
|---|---|
| Payment calculation | 5% of discretionary income (undergrad) / 10% (grad) |
| Discretionary income | AGI minus 225% of federal poverty line |
| Interest subsidy | 100% of unpaid interest covered |
| Forgiveness timeline | 20 years (undergrad) / 25 years (grad) |
| Early forgiveness | 10 years if original balance ≤$12,000 |
| Spouse income | Excluded if filing separately |
SAVE Payment Examples (Single Filer, 2025)
| Gross Income | Discretionary Income | Monthly Payment |
|---|---|---|
| $30,000 | $10,345 | $43 |
| $40,000 | $20,345 | $85 |
| $50,000 | $30,345 | $126 |
| $60,000 | $40,345 | $168 |
| $75,000 | $55,345 | $231 |
| $100,000 | $80,345 | $335 |
Based on 225% of 2024 federal poverty line ($36,450 for family of 1)
SAVE Advantages
- Lowest payments among all IDR plans
- Interest doesn’t capitalize
- Early forgiveness option
- Spouse income protection
PAYE (Pay As You Earn)
An older plan still available to some borrowers.
Key Features
| Feature | Details |
|---|---|
| Payment calculation | 10% of discretionary income |
| Discretionary income | AGI minus 150% of federal poverty line |
| Interest subsidy | 50% of unpaid interest (subsidized loans) |
| Forgiveness timeline | 20 years |
| Eligibility | New borrowers after Oct 1, 2007 |
PAYE Payment Examples (Single Filer)
| Gross Income | Discretionary Income | Monthly Payment |
|---|---|---|
| $30,000 | $14,700 | $123 |
| $40,000 | $24,700 | $206 |
| $50,000 | $34,700 | $289 |
| $60,000 | $44,700 | $373 |
Based on 150% of poverty line ($22,965 for family of 1)
IBR (Income-Based Repayment)
Two versions exist based on when you borrowed.
IBR Comparison
| Feature | New IBR (borrowed after 7/1/2014) | Old IBR (borrowed before 7/1/2014) |
|---|---|---|
| Payment | 10% of discretionary income | 15% of discretionary income |
| Forgiveness | 20 years | 25 years |
| Cap | Capped at 10-year standard payment | Capped at 10-year standard payment |
IBR Payment Examples (Single Filer, Old IBR)
| Gross Income | Discretionary Income | Monthly Payment |
|---|---|---|
| $30,000 | $14,700 | $184 |
| $40,000 | $24,700 | $309 |
| $50,000 | $34,700 | $434 |
| $60,000 | $44,700 | $559 |
ICR (Income-Contingent Repayment)
The oldest IDR plan, rarely the best option but has unique features.
Key Features
| Feature | Details |
|---|---|
| Payment calculation | 20% of discretionary income OR fixed 12-year payment |
| Forgiveness timeline | 25 years |
| Unique feature | Only IDR option for Parent PLUS (after consolidation) |
ICR Payment Examples (Single Filer)
| Gross Income | Monthly Payment (20%) |
|---|---|
| $30,000 | $245 |
| $40,000 | $412 |
| $50,000 | $578 |
| $60,000 | $745 |
Side-by-Side Payment Comparison
Scenario: Single filer, $50,000 income, $50,000 student loan balance
| Plan | Monthly Payment | 10-Year Total | Forgiveness Year |
|---|---|---|---|
| SAVE | $126 | $15,120 | Year 20-25 |
| PAYE | $289 | $34,680 | Year 20 |
| IBR (New) | $289 | $34,680 | Year 20 |
| IBR (Old) | $434 | $52,080 | Year 25 |
| ICR | $578 | $69,360 | Year 25 |
| Standard | $500 | $60,000 | N/A (paid off) |
Choosing the Right Plan
Choose SAVE If:
- You want the lowest possible payment
- You have undergraduate loans
- Your spouse has high income and you file separately
- You want interest coverage
- Your balance is under $12,000 (10-year forgiveness)
Choose PAYE If:
- You borrowed after Oct 2007 and before SAVE
- You want 20-year forgiveness
- Your spouse has similar or lower income
Choose IBR If:
- You don’t qualify for PAYE
- You prefer payment cap at standard 10-year amount
- You have older loans
Choose ICR If:
- You have Parent PLUS loans (only option after consolidation)
- You don’t qualify for other IDR plans
- You want lower payments than standard but not the lowest
How IDR Payments Are Calculated
SAVE Formula
Annual Payment = (AGI - 225% of FPL) × 5% (undergrad) or 10% (grad)
Monthly Payment = Annual Payment ÷ 12
Other IDR Plans Formula
Annual Payment = (AGI - 150% of FPL) × Plan Percentage
Monthly Payment = Annual Payment ÷ 12
2024/2025 Federal Poverty Lines
| Family Size | 100% FPL | 150% FPL | 225% FPL |
|---|---|---|---|
| 1 | $15,060 | $22,590 | $33,885 |
| 2 | $20,440 | $30,660 | $45,990 |
| 3 | $25,820 | $38,730 | $58,095 |
| 4 | $31,200 | $46,800 | $70,200 |
IDR Recertification
All IDR plans require annual recertification:
| Timing | What Happens If Missed |
|---|---|
| Annual deadline | Payments may increase to standard |
| 90-day grace period | May have time to recertify |
| Interest capitalization | May occur on some plans |
Tax Implications
| Timeframe | Tax Treatment |
|---|---|
| Through 2025 | Forgiveness is tax-free (American Rescue Plan) |
| After 2025 | Forgiveness may be taxable income |
| PSLF | Always tax-free |
Tax Bomb Example (If Taxable)
| Forgiven Amount | Tax Bracket | Potential Tax Due |
|---|---|---|
| $50,000 | 22% | $11,000 |
| $75,000 | 22% | $16,500 |
| $100,000 | 24% | $24,000 |
Key Takeaways
-
SAVE is best for most borrowers — Lowest payments, best interest coverage
-
Payments are based on income, not balance — High debt doesn’t mean high payments
-
Recertify annually — Missing deadline can significantly increase payments
-
Marriage matters — SAVE allows filing separately to exclude spouse income
-
Forgiveness timeline — 20-25 years for most; 10 years possible with SAVE for small balances
-
PSLF accelerates forgiveness — 10 years instead of 20-25 for public servants
The content on Wealthvieu is for informational purposes only and should not be considered financial, tax, or investment advice. Consult a qualified professional before making financial decisions. Full disclaimer · Editorial policy