What is an Income-Driven Repayment Plan for Student Loans?

 

An income-driven repayment plan takes into account a borrower's income and family size when calculating a monthly payment amount. The federal government's lineup of income-driven repayment plans is undergoing consolidation.
 

In 2026, there are four income-driven repayment plans available:
 

• Saving on a Valuable Education (SAVE) Plan (formerly the REPAYE Plan)

• Pay As You Earn (PAYE) Plan

• Income-Based Repayment (IBR) Plan

• Income Contingent Repayment (ICR) Plan
   

However, three of these plans will be phased out and eliminated by July 1, 2028: the SAVE Plan, the PAYE Plan, and the ICR Plan. The IBR Plan will remain available to borrowers who have already borrowed for college and who don't take out any new loans after July 1, 2026, and borrowers will no longer need to show a "partial financial hardship" to enroll. But this plan won't be available to new borrowers.
 

Starting July 1, 2026, a new income-driven plan, the Repayment Assistance Plan (RAP), will launch and will eventually be the sole income-driven plan for new student loans. Borrowers currently repaying their federal student loans under SAVE, PAYE, or ICR will need to transition to the new RAP, or, if they qualify, to the IBR Plan, by July 1, 2028.
 

Under the new Repayment Assistance Plan, which is available to undergraduate and graduate students, a borrower's monthly payment is based on his or her adjusted gross income, as follows:
 

• $10,000 or less: flat payment of $10 per month ($120 per year)

• $10,001 to $20,000: 1%

• $20,001 to $30,000: 2%

• $30,001 to $40,000: 3%

• $40,001 to $50,000: 4%

• $50,001 to $60,000: 5%

• $60,001 to $70,000: 6%

• $70,001 to $80,000: 7%

• $80,001 to $90,000: 8%

• $90,001 to $100,000: 9%

• $100,001 and over: 10%
   

For single borrowers, only the borrower's AGI is used to determine the monthly payment. For married borrowers, joint AGI is used if the couple files a joint federal income tax return; otherwise, for married couples who file a separate income tax return, only the borrower's AGI is used. For borrowers with dependents, the monthly payment is reduced by $50 for each dependent listed on a borrower's federal income tax return.
 

Under RAP, payments are applied first to interest, then to fees, then to principal. If the required payment is less than any new interest that accrues, the extra interest is waived. After 30 years of on-time payments, all remaining debt will be forgiven.
 

Payments made under RAP qualify for the federal Public Service Loan Forgiveness (PSLF) program.
 

Regarding the other plans, here's a brief summary of how they work:
 

• SAVE Plan:
  Undergraduate borrowers who meet income guidelines pay 5% of their discretionary income to their monthly loan payments and graduate school borrowers pay 10% of their discretionary income. For borrowers with original principal balances of $12,000 or less, all remaining loan balances will be forgiven after 10 years of payments. For original loan balances over $12,000, the maximum repayment period will increase by one year for every additional $1,000 borrowed. For example, a $13,000 loan will be forgiven after 11 years of payments, a $14,000 loan will be forgiven after 12 years of payments, and so on. The SAVE Plan replaced the Revised Pay As You Earn (REPAYE) Plan. (Under REPAYE, a borrower's monthly payment was set at 10% of discretionary income, with any remaining debt forgiven after 20 years of timely payments for undergraduate borrowers and 25 years for graduate school borrowers. Borrowers in the REPAYE Plan were automatically moved to the SAVE Plan.)
   

• PAYE Plan:
  Borrowers who obtained their loans on or after July 1, 2007 and meet income guidelines generally pay 10% of their discretionary income to their monthly loan payment, with any remaining debt forgiven after 20 years of timely payments.
   

• ICR Plan:
  Borrowers who meet income guidelines generally pay 20% of their discretionary income toward their monthly loan payment, with any remaining debt forgiven after 25 years of timely payments.
   

• IBR Plan:
  Borrowers who obtained their loans on or after July 1, 2014 and meet income guidelines generally pay 10% of their discretionary income to their monthly loan payment, with any remaining debt forgiven after 20 years of timely payments. Borrowers who obtained their loans before July 1, 2014 generally pay 15% of their discretionary income, with any remaining debt forgiven after 25 years.
   

Under any of these programs, borrowers in certain public interest jobs may be able to have their loans forgiven after 10 years under the federal Public Service Loan Forgiveness (PSLF) Program.

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For more information about any of these programs visit the Department of Education's student aid website.
 

The federal student aid website also offers a loan repayment simulator tool that borrowers can use to check eligibility and estimate monthly payments.
 

This content has been reviewed by FINRA.
 

Prepared by Broadridge Advisor Solutions. © 2026 Broadridge Financial Services, Inc.