What is income-driven repayment (IDR)? Plan types, eligibility, and how payments are calculated

If federal student loan payments feel overwhelming, an income-driven repayment (IDR) plan can be a game changer. IDR plans tie your monthly payment to your income and family size instead of to the original loan balance — which often produces a much lower (sometimes $0) monthly payment and can lead to loan forgiveness after a set number of qualifying payments. Below I’ll explain the main IDR plan types, who’s eligible, how monthly payments are calculated, and important practical details you need to watch out for — including recent legal and administrative developments that may affect your options.

The basic idea (quick)

IDR plans base your monthly payment on your income and family size rather than on how much you borrowed. That makes payments more affordable when earnings are low, but it can extend how long you pay and increase the total interest you pay over time. Most IDR plans also provide forgiveness after a certain number of qualifying payments (typically 20–25 years) or sooner if you qualify for Public Service Loan Forgiveness (PSLF).

The main IDR plans (what they are)

Currently (and historically) the U.S. federal government has offered several IDR plans. The most common are:

SAVE (Saving on a Valuable Education) — the newest plan introduced to reduce payments and accelerate forgiveness for many borrowers. (SAVE replaced or updated some features of earlier plans.)
REPAYE (Revised Pay As You Earn) — generally sets payments at 10% of discretionary income and counts all federal Direct Loans; household income is considered even if you filed taxes separately.
PAYE (Pay As You Earn) — caps payments at 10% of discretionary income but limits repayment term and borrower eligibility (for loans taken out after certain dates).
IBR (Income-Based Repayment) — caps payments at 10% or 15% of discretionary income depending on when you took out loans; has its own eligibility rules and forgiveness terms.
ICR (Income-Contingent Repayment) — uses a different discretionary-income definition and calculation method; it’s the least commonly used IDR plan.

Each plan differs on the percentage of discretionary income used, the definition of discretionary income, whether a spouse’s income is counted, and how many years of payments are required for forgiveness.

Load-bearing note: federal websites and your loan servicer have the up-to-date specifics for each plan — if you have a unique loan history (consolidations, FFEL vs. Direct Loans, Parent PLUS loans), details matter.

Who is eligible?

Eligibility depends on the plan and the type/date of your loans:

Generally, any borrower with federal student loans can apply to be considered for IDR, but eligibility rules vary by plan (for example, PAYE historically required you to have been a new borrower on or after a certain date). Parent PLUS loans are not directly eligible for most IDR plans unless consolidated into a Direct Consolidation Loan (and even then only certain plans apply).
The Department of Education requires income documentation (tax returns or alternative documentation) and family-size information to set your payment. You must recertify income and family size every year to keep your payment and to continue counting payments toward forgiveness. Missing recertification can cause your payment to increase or pause counting toward forgiveness.

How payments are calculated — the formula basics

While each plan has its own specifics, the general approach looks like this:

Start with your income — typically your Adjusted Gross Income (AGI) from your tax return or a projected current income if you use alternative documentation.
Subtract a poverty guideline multiple to compute your discretionary income. The multiple depends on the plan:
- PAYE and IBR usually use 150% of the federal poverty guideline for your family size and state.
- REPAYE and SAVE typically use 150% or a similar threshold (SAVE introduced changes to reduce payments further for low earners in certain situations).
- ICR uses 100% of the poverty guideline in its discretionary-income definition.
Multiply discretionary income by the plan’s percentage (commonly 10% or 15%) to get an annual payment amount, then divide by 12 for the monthly payment. For example, if your discretionary income is $24,000 and the plan uses 10%, annual payment = $2,400, monthly ≈ $200.

Two important caveats:

Some plans cap the payment so you’ll never pay more than you would under the 10-year Standard Repayment plan.
REPAYE counts spousal income even if you file separately; PAYE/IBR may not in that scenario. SAVE also has rules that can protect some borrowers in low-income situations from having spouse income counted the same way — check current guidance.

Examples (simple)

If your AGI is $40,000, family size 1, poverty guideline for your household is $14,580 (example), then:
- 150% poverty = $21,870 → discretionary income = $40,000 − $21,870 = $18,130.
- At 10% (PAYE/REPAYE/SAVE-style): annual payment = $1,813 → monthly ≈ $151.
- At 15% (some IBR cases): annual = $2,719 → monthly ≈ $227.

(These are illustrative; use the Department of Education’s Loan Simulator or your servicer’s calculator for precise numbers.)

Forgiveness and qualifying payment counts

Forgiveness timelines: Typically 20 or 25 years of qualifying payments (depending on plan and loan type). After that period, the remaining balance may be forgiven. Forgiven amount under the current federal rules has generally been tax-free, but tax treatment can change and some recent administrative updates have addressed prior tax implications.
PSLF: Public Service Loan Forgiveness remains a separate pathway where working full time for a qualifying employer while making qualifying payments can lead to forgiveness after 120 qualifying payments (10 years). Payments made under most IDR plans count toward PSLF if they meet the other PSLF rules.
Payment count adjustments: The Education Department has implemented account adjustments and one-time payment count corrections to help borrowers receive credit toward forgiveness for previously uncounted payments or time in administrative forbearance. If you think you have qualifying months that weren’t counted, check the Department’s announcements and your loan account.

Practical things to watch for

Recertify every year. If you don’t, you risk your payment jumping to the amount under the standard plan and losing credit toward forgiveness. Set a reminder.
Marital/spousal income rules matter. Filing status and plan selection affect whether your spouse’s income is used in calculations. Choose a plan with that in mind.
Interest capitalization. If your payment doesn’t cover interest, unpaid interest may capitalize (be added to principal) in some cases, increasing future interest — though some newer rules (and SAVE features) reduce or eliminate capitalization for low earners. Ask your servicer how interest is handled under the plan you pick.
Consolidation can change eligibility. Consolidating FFEL or Perkins loans into a Direct Consolidation Loan can make them eligible for different IDR options or PSLF, but consolidation can also reset the clock on qualifying payments.

Important recent (and ongoing) developments you should know

This area has seen significant legal and administrative changes in recent years. Court decisions and regulatory actions have, at times, suspended applications for IDR plans or altered how certain plans operate. In 2025 some courts blocked aspects of the Education Department’s SAVE program, which led to temporary pauses or changes in how IDR applications and forgiveness are processed. The Department has also taken steps to resume forgiveness and to make account adjustments for affected borrowers. Because this is evolving, check the Department of Education (StudentAid.gov) announcements and authoritative news reports for the latest status in your case before making decisions.

How to choose (and next steps)

Use the official Loan Simulator on StudentAid.gov to model plans and expected payments/forgiveness. It’s the single best quick tool.
If you’re low-income now or expect low income for years (grad school, early career, caregiving), IDR often makes sense. If you can afford higher payments to shorten the term and save interest, the Standard plan may cost less overall.
If you work in public service, apply for PSLF certification and get Employer Certification Forms filed — PSLF combined with IDR is powerful.
Keep documentation and proof of income, employment, and payment history. If account adjustments happen (as they have recently), documentation helps resolve mismatches.

Bottom line

IDR plans can reduce or even eliminate monthly payments when your income is low and can lead to loan forgiveness after a long period of qualifying payments. They’re not one-size-fits-all: plan details, eligibility, and payment calculations differ, and ongoing legal or regulatory changes can affect availability and processing. Your best immediate moves are to model scenarios with the Department of Education’s Loan Simulator, talk to your loan servicer about plan rules and recertification, and keep careful records. If you want, I can walk through your numbers (AGI, family size, loan balance and interest) and produce side-by-side examples for the major plans so you can see what your payment and total cost might look like.

Key sources

U.S. Department of Education — StudentAid.gov: IDR plan descriptions, calculators, and announcements.
Consumer Financial Protection Bureau — explainer on IDR plans and qualification.
Coverage of recent legal developments affecting IDR/SAVE (reporting, March–2025).