Income-driven repayment (IDR) is an umbrella term for several federal repayment plans that all have monthly payments calculated based on your income and family size.
Payments under an IDR plan typically won’t cover the interest on your loan, so your loan balance may go up rather than down even though you’re making payments. If you’re working toward forgiveness under income-driven repayment or a program like Public Service Loan Forgiveness, then you can pay less over time and have the remainder of your loan forgiven.
After making payments on an IDR plan for a set amount of time (usually 20 to 25 years), the remainder of your loan balance can be forgiven. The amount forgiven can be taxed as income, unlike forgiveness under Public Service Loan Forgiveness (PSLF).
If you don’t qualify for forgiveness under PSLF, or if your income rises enough that you pay off your loan before the forgiveness timeline, you can end up paying more over the life of your loan due to interest.
Not every loan will be eligible for every IDR plan. That will depend on your loan type, when you took out the loan, and whether you meet a “partial financial hardship” requirement as determined by the Department of Education.
Different IDR Plans:
There are a few differences between the IDR plans: they’re based on different percentages of discretionary income, calculated differently, and have different timelines for forgiveness.
This can be really confusing, but we’re here to help! Summer’s income-driven repayment tool can use your financial situation and loan details to estimate what your monthly payments would be under each plan. You’ll be able to review the comparison before deciding to move forward.
The IDR plans are:
- Pay As You Earn Repayment Plan (PAYE Plan)
- Save on a Valuable Education (SAVE Plan), formerly REPAYE
- Income-Based Repayment Plan (IBR Plan)
- Income-Contingent Repayment Plan (ICR Plan)
Annual Recertification:
All IDR plans need to be recertified annually by providing proof of your income to your loan servicer and the Department of Education.
Even though payments have resumed as of September 2023, the Education Department (ED) has extended the recertification deadline to November 1, 2024. This means the latest you should submit your recertification is by September 24, 2024, to give your application enough time to be processed by November.
The consequences of missing your annual recertification deadline vary depending on your IDR plan. For more details on each plan’s consequences for failing to recertify by your recertification date, refer to Federal Student Aid (FSA).
The IDR application was updated in 2023 so that you can consent to allow the Education Department (ED) to access your tax information through the IRS. Starting July 2024, if you consent to this benefit, your IDR plan will automatically recertify annually and you will be informed before your new monthly plan amount goes into effect. If your income decreases before your recertification, you can manually submit a recalculation application so that your monthly payment reflects your new income.
If you signed up for auto-enrollment and your family size isn’t accurately reflected on your tax return, you will be given the opportunity to update your family size with your loan servicer to ensure an accurate monthly payment amount.
Switching out of IDR:
You can always decide to switch out of an IDR plan if your priorities or circumstances change. Interest will only be capitalized when leaving the IBR plan due to a required statute. Some of the IDR plans have monthly payments that are capped at the Standard ten-year plan amount. That means that you can stay on the IDR plan while making payments in the Standard amount.
Automatic Enrollment After Missed Payments:
Starting in July 2024, if you signed up for automatic re-enrollment of IDR and you miss 75 days or more of payments on your loans, you will automatically be placed in the IDR plan with the lowest monthly payment.