Income-Driven Repayment: Is It Right for You?

Can't afford federal student loan payments? Qualify for public service loan forgiveness? It might be right for you.
Anna Helhoski
By Anna Helhoski 
Edited by Des Toups

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The federal government offers four income-driven repayment, or IDR, plans that can lower your monthly bills based on your income and family size. It could even be $0 if you're unemployed or earn less than 150% of the poverty threshold.

Switching to one of these plans is usually right for you in the following instances:

Here’s what to know about the different income-driven plans before you sign up.

Which income-driven repayment plan is best for you?

All income-driven repayment plans share some similarities: Each caps payments to between 10% and 20% of your discretionary income and forgives your remaining loan balance after 20 or 25 years of payments. The four plans are:

The least confusing way to select a plan is to let your servicer place you on the one you qualify for that has the lowest monthly payment. You can choose this option when you complete the income-driven repayment plan application.

But the plans do have some distinct differences. A specific one may be necessary, or best for you, in the following instances.

Payments under every income-driven plan count toward Public Service Loan Forgiveness. If you’ll qualify for this program, choosing the plan that offers you the smallest payment is likely your best bet.

Before enrolling in any income-driven plan, plug your loan information into Federal Student Aid’s Loan Simulator. This will give a good idea of your monthly bills, overall costs and forgiveness amounts under each plan.

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You must recertify your income and family size every year

To keep your income-driven repayment status you must recertify income-based repayment every year. If your income changes, your payments will change, too. If you miss the recertification deadline, you’ll have to pay more — likely the standard repayment plan amount — until you re-enroll. Any interest will typically be capitalized, or added to your principal balance, at that point.

IDR recertification dates have been extended until at least March 2023. Borrowers will be notified when it is time to recertify.

You can temporarily self-report income

Through Feb. 28, 2023, borrowers can self-report their income when applying for or recertifying an income driven-repayment plan, according to the Education Department. That means you don't have to submit tax documentation when you report your income. This can be completed online when you submit the IDR application, as normal; in Step 2 of the application, select "I'll report my own income information." The Student Loan Servicing Alliance confirmed in December 2021 that borrowers may also self-certify by phone.

Income-driven repayment disadvantages

While income-driven repayment options can make monthly student loan payments more affordable, these programs do have some potential disadvantages.

Income-driven plans extend your repayment term from the standard 10 years to 20 or 25 years. Since you’ll be repaying your loan for longer, more interest will accrue on your loans. That means you may pay more under these plans — even if you qualify for forgiveness.

It’s likely you’ll pay off your loan before forgiveness kicks in. If you have a balance left at the end of the repayment term, the forgiven amount will normally be taxed as income unless you qualify for Public Service Loan Forgiveness. However, a temporary provision eliminates taxes on forgiven student loans through the end of 2025.

If you're married your spouse's income may also be factored into your student loan payment amount. If you file taxes jointly, your joint income will always be used to calculate payments under any income-driven plan. But if you file taxes separately from your spouse, only REPAYE will use both of your incomes to calculate payments.

The Department of Education is implementing income-driven repayment fixes

Millions of borrowers are expected to benefit from one-time fixes that count past payments toward the 240 or 300 needed for income driven repayment forgiveness, the Department of Education announced on April 19.

In 2023, federal student aid will also start displaying income-driven repayment payment counts on when borrowers log into their accounts. And the federal student aid office plans to allow more loan statuses, such as deferments and forbearances, to count toward income-driven repayment forgiveness moving forward. It’s unclear when those changes will go into effect or which loan statuses will be included.

How to apply for income-driven repayment

You can apply for income-driven repayment at or by sending your student loan servicer a paper request form. You can change your student loan repayment plan at any time.

To complete the application, you will need to provide information about your family size and your most recent federal income tax return or transcript. If you didn’t file taxes, you’ll need to submit alternate proof of any taxable income you’ve earned within the past 90 days, such as:

  • Pay stubs.

  • A letter from your employer listing your gross pay.

  • A signed statement explaining your income, if formal documentation is unavailable.

Your servicer can put your loans in forbearance while processing your application. You aren’t required to make payments during forbearance, but interest will accrue on your loan. This increases the amount you owe.

Can’t afford income-driven repayment?

Factors besides your income can affect how income-driven payments are calculated. If your payments end up being too high, the federal government offers extended repayment and graduated repayment plans, which lower your payments but aren’t based on your income. You may pay more interest under these plans, though, and neither offers loan forgiveness.

Refinancing your student loans with a private lender could also reduce your monthly payments, depending on the new loan’s terms. But refinancing federal student loans can be risky, as you’ll lose access to programs like income-driven repayment and loan forgiveness. Be sure you’re comfortable giving up those options before refinancing.

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