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IDR

Loan & Credit

Income-Driven Repayment

A category of US federal student loan repayment plans that set monthly payments as a percentage of discretionary income rather than the loan balance. Remaining balance is forgiven after 10–25 years depending on the plan.

Definition

Income-Driven Repayment (IDR) refers to a set of US federal student loan repayment plans that calculate your monthly payment as a percentage of your discretionary income — the difference between your annual income and a multiple of the Federal Poverty Line for your family size — rather than based on your loan balance.

IDR plans exist because the standard 10-year repayment plan assumes equal capacity to repay across all borrowers, which disadvantages those who entered lower-income fields, have high debt relative to their salary (common for graduate and professional school borrowers), or whose income is below the poverty threshold.

Under all IDR plans, if you make all required payments for the full plan term, any remaining balance is discharged (forgiven). The term length and payment percentage differ by plan:

Plan Payment % Income Threshold Forgiveness Interest Subsidy
SAVE 5% (undergrad) 225% FPL 20 years Yes — balance never grows
PAYE 10% 150% FPL 20 years No
IBR (new) 10% 150% FPL 20 years No
ICR 20% 100% FPL 25 years No
PSLF 10% (via IDR) 150% FPL 10 years No

PSLF (Public Service Loan Forgiveness) is not technically an IDR plan itself, but it requires enrollment in an IDR plan and forgives the balance after just 10 years for qualifying public service workers.

Use the Student Loan Forgiveness Calculator to model your payment, total paid, and expected forgiveness under each plan.

Formula

2025 Federal Poverty Line (continental US):

FPL(n) = $15,650 + (n − 1) × $5,500 (n = family size)

Discretionary income (SAVE):

Discretionary Income = max(0, Annual Income − 2.25 × FPL)

Discretionary income (PAYE/IBR/PSLF):

Discretionary Income = max(0, Annual Income − 1.50 × FPL)

Monthly IDR payment:

Monthly Payment = (Discretionary Income × Plan Rate%) ÷ 12

Worked Example

Borrower: Annual income $52,000 · Family size 1 · Plan: SAVE

2025 FPL for family of 1: $15,650

SAVE income threshold (225%): $15,650 × 2.25 = $35,213

Discretionary income: $52,000 − $35,213 = $16,787

Monthly SAVE payment: $16,787 × 5% ÷ 12 = $70/month

Compare with standard 10-year repayment on $40,000 at 6.5%: $454/month

IDR saves $384/month. After 20 years of SAVE payments, any remaining balance is forgiven.

Key Things to Know

  • Annual recertification is required: Miss the annual income recertification and your payment temporarily jumps to the standard 10-year amount. Set a calendar reminder at 11 months.
  • Direct Loans only: Federal Family Education Loans (FFEL) and Perkins Loans must be consolidated into the Direct Loan program before IDR eligibility applies.
  • PSLF requires IDR enrollment: To qualify for PSLF 10-year forgiveness, you must be enrolled in an IDR plan (or the standard 10-year plan, though standard plan payments pay off the loan before 120 qualifying payments for most borrowers).
  • Tax bomb risk for IDR forgiveness: Unlike PSLF, IDR forgiveness after 20–25 years may be taxable income after 2025. A $80,000 forgiven balance could create a $20,000+ tax bill in the forgiveness year — plan accordingly.
  • SAVE interest subsidy is the key differentiator: SAVE's interest subsidy means your balance never grows even when your payment doesn't cover monthly interest — critical for high-balance, low-income borrowers.

Related Calculators

Student Loan Forgiveness Calculator →Estimate your monthly IDR payment and loan forgiveness amount under SAVE, PAYE, IBR, ICR, or PSLF. See total paid and years until forgiveness in seconds.
Debt-to-Income Ratio Calculator →Calculate your front-end and back-end DTI ratio instantly. See if your debt load qualifies for a mortgage or loan using the 28/36 rule and lender benchmarks.

Related Terms

PSLFPublic Service Loan ForgivenessDTIDebt-to-Income RatioMortgageHome Loan Product (US / Global)

Frequently Asked Questions

Income-Driven Repayment (IDR) is a category of federal student loan repayment plans that cap monthly payments at a percentage of your discretionary income — typically 5–20% — rather than amortizing the loan over a fixed schedule. After 10–25 years of qualifying payments (depending on the plan), whatever balance remains is forgiven. Eligibility requires federal Direct Loans; private student loans do not qualify.
The four main IDR plans are: SAVE (5% of discretionary income for undergrad loans, 20-year forgiveness, interest subsidy prevents balance growth), PAYE (10%, 20 years, available to newer borrowers), IBR (10% for new borrowers, 20 years), and ICR (20% or fixed 12-year payment, 25 years). SAVE is generally the most favorable for most borrowers because of its higher income threshold (225% of poverty line vs 150%) and the interest subsidy.
Under the SAVE plan, if your monthly payment does not fully cover accrued interest, the federal government pays the difference — meaning your loan balance can never grow above its starting amount due to unpaid interest. This eliminates the negative amortization problem that affects PAYE and IBR borrowers with large balances and low incomes, where balances could grow substantially over a 20-year repayment period before forgiveness.
IDR forgiveness (under SAVE, PAYE, IBR, or ICR) was temporarily exempt from federal income tax through 2025 under the American Rescue Plan Act. After 2025, the tax treatment is uncertain — forgiven IDR balances have historically been treated as taxable income. PSLF forgiveness is different: it is permanently tax-free by law. If you are pursuing IDR forgiveness, plan for a potential federal income tax bill in the forgiveness year.
Apply through your federal loan servicer (Mohela, Aidvantage, etc.) or directly at studentaid.gov. You will need to provide income documentation — most people use the IRS Data Retrieval Tool to import tax return data automatically. You must recertify your income and family size every 12 months to maintain IDR eligibility. Missing the recertification deadline causes your payment to temporarily revert to the standard 10-year plan amount.