Income-Driven Repayment (IDR)
Federal student loan repayment plans that cap monthly payments at a percentage of discretionary income and offer loan forgiveness after 20–25 years of qualifying payments.
What is Income-Driven Repayment?
Income-driven repayment (IDR) plans are federal student loan repayment options that calculate monthly payments based on a borrower's income and family size rather than the loan balance. Major IDR plans include Saving on a Valuable Education (SAVE), Pay As You Earn (PAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR). Monthly payments are typically capped at 5–20% of discretionary income (income above 100–225% of the federal poverty line). After 20–25 years of qualifying payments, any remaining balance is forgiven, though the forgiven amount may be taxable. IDR plans are particularly valuable for borrowers in public service jobs, who may qualify for Public Service Loan Forgiveness (PSLF) after just 10 years.
Example
A nurse earns $55,000 per year and has $80,000 in federal student loans. Under SAVE, her monthly payment is roughly $175 (5% of discretionary income). After 20 years of qualifying payments, any remaining balance is forgiven. Without IDR, the standard 10-year repayment would require about $880 per month on the same balance.
Source: US Department of Education — Income-Driven Repayment Plans