Quick summary: Income-driven repayment (IDR) plans offer lower monthly payments based on your income, potential loan forgiveness after 20-30 years, and protection from default. The main drawbacks include longer repayment terms, possible negative amortization, and taxable forgiveness (after 2025). IDR is best for borrowers with high debt relative to income or those pursuing Public Service Loan Forgiveness.
⚠️ Update: The SAVE Plan has been blocked by federal courts and is being eliminated. Borrowers in SAVE must switch to a different plan. A new plan called RAP launches July 1, 2026.
If you’re a federal student loan borrower considering income-driven repayment, you’ll want to weigh the benefits against the potential drawbacks before enrolling. Income-driven repayment plans base your monthly payment on your income rather than your debt, which can provide significant relief, but there are tradeoffs to consider.
The current income-driven repayment options include Income-Contingent Repayment (ICR), Income-Based Repayment (IBR), Pay-As-You-Earn (PAYE), and starting July 2026, the Repayment Assistance Plan (RAP).
What are the benefits of income-driven repayment plans?
There are many benefits of income-driven repayment that make these plans attractive for borrowers experiencing financial difficulty or pursuing loan forgiveness.
Lower monthly payments
Income-driven repayment plans provide borrowers with more affordable student loan payments by basing the payment on income rather than the amount owed. These plans usually provide the lowest monthly payment among all federal repayment options.
Generally, borrowers benefit most from income-driven repayment if their total student loan debt at graduation exceeds their annual income. The monthly payment is typically 10-20% of your discretionary income under current plans, or 1-10% of your total income under RAP.
Payments can be as low as $0
Under current IDR plans (ICR, IBR, and PAYE), low-income borrowers may qualify for a $0 monthly payment. This happens when your income falls below the poverty level threshold used by that plan. Even a $0 payment counts toward loan forgiveness.
Note that the new RAP plan (starting July 2026) eliminates $0 payments—the minimum will be $10 per month.
See also: My IDR Payment is $0. Now What?
Loan forgiveness after 20-30 years
Any remaining loan balance is forgiven after you make payments for 20-30 years, depending on the plan. Under current plans, forgiveness comes after 20-25 years. Under RAP, forgiveness comes after 30 years.
Public Service Loan Forgiveness (PSLF) offers a faster path, just 120 payments (10 years) for borrowers working in government or nonprofit jobs. PSLF forgiveness is also permanently tax-free.
Protection during unemployment
Income-driven repayment helps borrowers who are unemployed or underemployed. Since your payment is based on income, losing your job means your payment drops, potentially to $0 under current plans or $10 under RAP. This keeps you in good standing and protects your credit while you search for work.
This is especially valuable for borrowers who have exhausted their eligibility for unemployment deferment, economic hardship deferment, or forbearance.
Interest subsidies
The federal government pays or waives unpaid interest in some situations:
- IBR and PAYE: The government pays 100% of unpaid interest on subsidized loans during the first three years.
- RAP: All unpaid interest is waived every month, plus up to $50 of your payment goes directly to principal.
- ICR: No interest subsidy.
No credit score damage
Making your required IDR payment, even if it’s $0, keeps you in good standing. You’ll be reported as current to credit bureaus, protecting your credit score. This is far better than missing payments on a standard plan you can’t afford, which would damage your credit and eventually lead to default.
What are the drawbacks of income-driven repayment plans?
While income-driven repayment helps borrowers manage unaffordable payments, there are significant drawbacks to consider.
Limited eligibility
Income-driven repayment is only available for federal student loans. Private student loans don’t offer IDR options.
Parent PLUS loans have very limited access. They’re not eligible for IBR, PAYE, or RAP. The only current option is ICR through consolidation, but ICR ends July 1, 2028. After that, Parent PLUS borrowers will only have access to the standard repayment plan.
See also: Are Parent Loans Eligible for Income-Driven Repayment?
Your balance can grow
When your monthly payment is less than the interest accruing on your loans, you experience negative amortization, your balance grows even as you make payments. This can be psychologically difficult, even if you’re on track for eventual forgiveness.
RAP addresses this by waiving all unpaid interest, so your balance won’t grow. Under ICR, IBR, and PAYE, however, negative amortization remains a real concern.
Forgiveness is taxable (after 2025)
Loan forgiveness after 20-30 years of IDR payments is treated as taxable income by the IRS. The tax-free treatment under the American Rescue Plan Act expired at the end of 2025, so borrowers receiving forgiveness in 2026 or later will face a “tax bomb.”
For example, if you have $50,000 forgiven, that amount is added to your taxable income for the year. Options for managing this tax bill include:
- Filing IRS Form 982 if you’re insolvent (debts exceed assets)
- Requesting an offer in compromise with IRS Form 656
- Setting up a payment plan with IRS Form 9465
Public Service Loan Forgiveness remains permanently tax-free.
Marriage can increase payments
Some IDR plans have a marriage penalty. If you file taxes jointly, your payment is based on combined household income, which could significantly increase your monthly bill if your spouse earns income.
You can file taxes as “married filing separately” to base payments on just your income, but this means losing valuable tax benefits like the American Opportunity Tax Credit, Lifetime Learning Credit, and student loan interest deduction.
See also: Whose Income Counts for Income-Driven Repayment Plans?
Annual recertification required
You must recertify your income and family size every year. Miss the deadline and you could be moved to a standard repayment plan with a much higher payment. Late recertification can also trigger interest capitalization, adding unpaid interest to your principal balance.
Long repayment timeline
The 20-30 year path to forgiveness means carrying debt for most of your career. Under current plans, forgiveness comes after 20-25 years. Under RAP, it’s 30 years, more than half the average working life.
You may still be repaying student loans when your own children are heading to college, which can limit your ability to save for their education or help them avoid debt.
Is income-driven repayment right for you?
Income-driven repayment makes sense in these situations:
- High debt-to-income ratio – Your student loan debt exceeds your annual income
- Low or unstable income – You’re unemployed, underemployed, or have variable earnings
- Risk of default – You can’t afford your current payments and are falling behind
- Pursuing PSLF – You work in government or nonprofit and want forgiveness after 10 years
IDR may not be the best choice if:
- You can afford standard payments and want to pay off loans faster
- You have a high income relative to your debt
- You want to minimize total interest paid over the life of the loan
- You have Parent PLUS loans (very limited IDR access)
See our Income-Driven Repayment Calculator to estimate your payments under different plans.
Key Takeaways
- IDR plans offer lower monthly payments based on income, with payments potentially as low as $0 (or $10 under RAP).
- Remaining balances are forgiven after 20-30 years, but forgiveness after 2025 is taxable income.
- PSLF offers tax-free forgiveness after just 10 years for qualifying public service workers.
- Your loan balance can grow under current plans if payments don’t cover interest (RAP fixes this with interest waivers).
- Annual recertification is required, missing deadlines can significantly increase your payments.
- Parent PLUS loans have very limited IDR access, with options ending in July 2028.
- IDR is best for borrowers with high debt relative to income or those pursuing PSLF.
Frequently Asked Questions
IDR plans are worth it if you have high debt relative to your income, are struggling to afford payments, or are pursuing Public Service Loan Forgiveness. They provide lower monthly payments and eventual forgiveness. However, if you can afford standard payments and want to minimize total interest paid, IDR may not be the best choice.
No. Making your required IDR payment, even if it’s $0—keeps you in good standing and protects your credit. You’ll be reported as current to credit bureaus. IDR can actually help your credit by preventing missed payments and default.
Yes, for forgiveness after 2025. The tax-free treatment expired at the end of 2025, so IDR forgiveness in 2026 and beyond is treated as taxable income. The exception is Public Service Loan Forgiveness (PSLF), which remains permanently tax-free.
Yes, you can switch repayment plans at any time by contacting your loan servicer or applying at StudentAid.gov. However, switching to a non-IDR plan means you’ll lose progress toward IDR forgiveness, though PSLF-qualifying payments are preserved.
If you miss the recertification deadline, you may be moved to a standard repayment plan with higher payments. Any unpaid interest may be capitalized (added to your principal balance). Contact your servicer immediately if you miss the deadline to minimize the impact.
Parent PLUS loans have very limited IDR access. They’re not eligible for IBR, PAYE, or RAP. Currently, the only option is ICR through consolidation, but ICR ends July 1, 2028. After that date, Parent PLUS borrowers will only have the standard repayment plan.
