Douglas Olsen
Income-driven repayment (IDR) plans are a viable option for borrowers struggling with federal student loan payments. IDR plans offer flexibility by setting monthly payments as a fraction of discretionary income, which can be as low as $0 per month. This amount is adjusted annually based on income and family size, ensuring affordability. While IDR plans can help borrowers manage their loans and even progress towards loan forgiveness, challenges exist. Some borrowers may face higher payments if they fail to complete annual recertifications, and the legal status of certain IDR plans is currently uncertain due to pending litigation. Additionally, there may be tax implications for loan debt forgiven through IDR starting in 2026. To make informed decisions, borrowers should carefully review the pros and cons of IDR plans and consult official sources, such as Federal Student Aid and the Department of Education, for the latest information on eligibility, applications, and potential changes to the student loan system.
| Characteristics | Values |
|---|---|
| Monthly payment amount | Based on income and family size |
| Payment flexibility | Can go up or down depending on income and family size |
| Loan forgiveness | Remaining balance is forgiven after the repayment period |
| Application process | Free and requires income information |
| Recertification | Annual recertification required, can be streamlined by providing consent to share tax returns |
| Minimum payment | $0 per month possible, but may encourage disengagement from servicers |
| Loan types | Most federal student loans are eligible, but some Parent PLUS and FFEL loans are ineligible |
| Repayment period | Typically 20-25 years, after which any remaining balance is cancelled |
| Tax implications | Beginning in 2026, there may be tax consequences for forgiven loan debt |
| Plan changes | IDR plans are currently in legal limbo due to litigation, with potential replacement by the Repayment Assistance Plan (RAP) |
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What You'll Learn
Pros and cons of IDR plans
Income-Driven Repayment IDR plans are a viable option for borrowers struggling to pay their federal student loans. These plans offer several benefits, such as:
Pros
- Lower monthly payments: IDR plans base monthly payments on factors such as income, family size, and loan type, making payments more affordable, especially if your student loan debt exceeds your annual income.
- Flexibility: IDR plans provide flexibility to handle unexpected situations, like losing your job. You can request a recalculation of your monthly payment if your circumstances change, potentially lowering your payment amount.
- Loan forgiveness: After completing the IDR plan's repayment period, any remaining balance is forgiven. Additionally, under the American Rescue Plan Act of 2021, loan forgiveness after 20 or 25 years of payments is tax-free through 2025.
- Default prevention: IDR plans can help borrowers avoid defaulting on their loans, which could otherwise harm their credit score.
- No credit score impact: As long as you make your IDR plan payments on time, your credit score will not be affected.
- Convenience: IDR plans offer a free application process, and loan servicers are available to manage your loans and provide assistance.
However, there are also some potential drawbacks to consider:
Cons
- Rising payments: If your income increases, your monthly payments under an IDR plan may also rise over time.
- Loan type eligibility: Not all loans are eligible for IDR plans. Parent PLUS loans and Federal Family Education Loan (FFEL) Program loans, for example, are generally not eligible unless consolidated into a Direct Loan.
- Recertification process: To ensure accurate monthly payments, borrowers must update their income and family size information annually. Failure to meet the deadline may result in paying more than necessary.
- Potential for higher overall cost: While IDR plans offer lower monthly payments, the extended repayment period may result in paying more interest over time.
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How to apply for an IDR plan
Applying for an IDR plan is free and can be done online. Here is a step-by-step guide on how to apply for an Income-Driven Repayment (IDR) plan:
Step 1: Check Eligibility
Firstly, you need to determine if you are eligible for an IDR plan. Most federal student loans are eligible for at least one IDR plan. However, loan type can affect eligibility. Log in to your StudentAid.gov account to check your loan type(s) and review the specific eligibility requirements for each IDR plan. Defaulted loans are not eligible for any IDR plans.
Step 2: Gather Income Information
Along with your application, you will need to provide income information. You can either provide documentation, such as your most recent tax return, pay stubs, or a letter from your employer, or you can consent to secure access to your federal financial information, which is an option within the IDR application.
Step 3: Submit an IDR Plan Request
Log in to your StudentAid.gov account to access and submit the IDR Plan Request application.
Step 4: Monitor Your Application Status
You can check the status of your IDR Plan Request by logging in to your My Activity page on StudentAid.gov. If your application is approved, your IDR plan's monthly payment amount will be based on your income and family size.
Step 5: Recalculate Payments if Needed
If your financial situation changes, and the monthly payment amount no longer reflects your current situation, you can submit updated information to request a recalculation of your monthly payment. This can be done by logging in to your StudentAid.gov account and selecting "Manage Your Plan" on the IDR Plan Request page.
Please note that providing consent for secure access to your federal tax information allows for automatic annual recertification of your IDR plan.
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IDR plan litigation
The U.S. Department of Education's Office of Federal Student Aid (FSA) has been involved in litigation regarding the implementation of the Biden Administration's Saving on a Valuable Education (SAVE) Plan and parts of other Income-Driven Repayment (IDR) plans. In February 2025, the Eighth Circuit Court of Appeals held that the SAVE Plan was unlawful, resulting in an injunction by a federal district court in April 2025. This injunction directed the Department to instruct its federal student loan servicers to start charging interest on impacted loans from August 1, 2025, affecting borrowers enrolled in the SAVE Plan.
The litigation and court orders have had a significant impact on borrowers' rights and repayment plans. As of spring 2025, temporary orders in the SAVE litigation have resulted in the Income-Based Repayment (IBR) plan being the only IDR plan offering loan cancellation. All other IDR plans' cancellations are currently paused due to pending court cases. The Department of Education has encouraged borrowers with loans in the SAVE Plan to use the Loan Simulator to estimate monthly payments and explore alternative repayment plans.
The Biden Administration's SAVE Plan was based on the promise of loan cancellation and zero monthly payments, which multiple federal courts have struck down. The Trump Administration has committed to supporting borrowers in transitioning to legal and sustainable repayment plans. The Department of Education has resumed collections and reminded borrowers of their legal obligation to repay their loans, emphasizing the benefits of regular progress toward repayment.
The IDR plan application process has also been affected by the litigation. The online application was temporarily paused to comply with the court injunction, and borrowers could only submit paper loan consolidation applications. The Department of Education has since reopened the revised IDR plan and loan consolidation applications, and borrowers can now apply for the IBR, Pay As You Earn (PAYE), and Income-Contingent Repayment (ICR) Plans using the updated IDR application.
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Loan forgiveness
Income-driven repayment (IDR) plans offer loan forgiveness after the repayment period. The monthly payment amount is based on income and family size. Applying for an IDR plan is free, and the application process involves submitting an IDR Plan Request and providing income information. This can be done by providing consent for secure access to federal financial information or by providing documentation such as tax returns or pay stubs.
There are pros and cons to IDR plans. One advantage is that if your financial situation changes, you can submit updated information to request a recalculation of your monthly payment amount. Additionally, by providing consent for direct access to federal tax information, your IDR plan can be automatically recertified each year.
However, it's important to note that not all loan types are eligible for IDR plans. For example, parent PLUS loans and FFEL Program loans are only eligible if they are consolidated into a Direct Loan. If an IDR plan doesn't meet your repayment goals, there are alternative repayment plans available.
While IDR plans can provide loan forgiveness and flexibility based on income, it's essential to carefully consider the specific terms, eligibility requirements, and potential drawbacks before deciding if this approach aligns with your financial goals and circumstances.
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Alternative repayment plans
- A maximum repayment term of 30 years, excluding periods of authorized deferment and forbearance.
- Compliance with the three-times rule, where no payment is more than three times the smallest payment.
Generally, federal loan servicers offer four versions of alternative repayment plans, the first two of which are variations on level amortization where the borrower picks a particular monthly payment or repayment term, subject to regulatory restrictions.
Alternative repayment is often used as a mechanism to provide defaulted Parent PLUS Loan borrowers with an income-based repayment plan, even though they are not normally eligible for Income-Based Repayment (IBR), Income-Contingent Repayment (ICR), Pay-As-You-Earn Repayment (PAYE), or Revised Pay-As-You-Earn Repayment (REPAYE).
If you are struggling with your federal student loan payments, an income-driven repayment (IDR) plan may be a good option. Your monthly payment is based on your income and family size. Applying is free, and after you complete the repayment period for each IDR plan, your remaining balance is forgiven. However, loans made for parents (Plus or FFEL loans) are never eligible, even if consolidated. Parent PLUS loans and FFEL Program loans are only eligible if they are consolidated into a Direct Loan. If an IDR plan doesn't meet your repayment goals, there are other repayment plans available. Most federal student loans are eligible for at least one IDR plan.
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Frequently asked questions
An IDR plan sets your monthly payment amount as a fraction of your discretionary income, based on your family size, rather than a fixed payment for a set number of years.
An IDR plan can provide insurance against unaffordable payments when your income is low. After a certain number of years of making payments, any remaining loan balance is forgiven. You may even qualify for payments as low as $0 per month.
Most IDR plans are currently in legal limbo due to litigation against the newest IDR plan. Additionally, IDR plans may require annual recertification, which some borrowers struggle to complete.
