Income-Driven Repayment Plans for Federal Student Loans

Federal Student Aid | StudentAid.gov Page 1 of 6

What is an income-driven repayment plan?

An income-driven repayment plan is a repayment plan that sets your monthly student loan payment at an amount that is intended to be affordable based on your

income and family size. The U.S. Department of Education offers four income-driven repayment plans: Revised Pay As You Earn Repayment Plan (REPAYE

Plan), Pay As You Earn Repayment Plan (PAYE Plan), Income-Based Repayment Plan (IBR Plan), and Income-Contingent Repayment Plan (ICR Plan). Most

federal student loans are eligible for at least one income-driven repayment plan.

How are monthly payment amounts determined under income-driven

repayment plans?

The chart below shows how payment amounts are determined under each income-driven plan. Depending on your income and family size, you may have no

monthly payment at all. You can estimate your payments under these plans using the Repayment Estimator at StudentAid.gov/repayment-estimator.

Repayment

Plan

Payment Amount

REPAYE Plan

Generally 10 percent of your discretionary income

PAYE Plan

Generally 10 percent of your discretionary income, but never more than the 10-year Standard

Repayment Plan amount

IBR Plan

Generally 10 percent of your discretionary income if you are a new borrower on or after July 1, 2014*,

but never more than the 10-year Standard Repayment Plan amount

Generally 15 percent of your discretionary income if you are not a new borrower on or after

July 1, 2014*, but never more than the 10-year Standard Repayment Plan amount

ICR Plan

The lesser of the following:

 20 percent of your discretionary income or

 what you would pay on a repayment plan with a fixed payment over the course of 12 years, adjusted

according to your income

* For the IBR Plan, you are a new

borrower on or after July 1, 2014, if

you had no outstanding balance on a

William D. Ford Federal Direct Loan

(Direct Loan) Program loan or

Federal Family Education Loan

(FFEL) Program loan when you

received a Direct Loan on or after

July 1, 2014. (Because no new FFEL

Program loans have been made

since June 30, 2010, only Direct

Loan borrowers may qualify as new

borrowers on or after July 1, 2014.)

Federal Student Aid | StudentAid.gov Page 2 of 6

Sample Payment Amounts

The tables below provide repayment estimates under the traditional and income-driven repayment plans. These figures are estimates based on an interest rate of

6%, the average Direct Loan interest rate for undergraduate and graduate borrowers. The figures also assume a family size of 1, that you live in the continental

U.S., and that your income increases 5% each year. Various factors, including your interest rate, your loan debt, your income, and if and how quickly your income

rises, may cause your repayment to differ from the estimates shown in these tables. These figures use the 2016 Poverty Guidelines issued by the U.S. Department

of Health and Human Services and Income Percentage Factors issued by the U.S. Department of Education.

Undergraduate Loan Debt* of $30,000 in Direct Unsubsidized

Loans and Starting Income of $25,000

Repayment

Plan

Initial

Payment

Final

Payment

Time in

Repayment

Total Paid

Loan

Forgiveness

Standard

$333

10 years

$39,967

N/A

Graduated

$190

$571

10 years

$42,636

N/A

Extended-

Fixed

Ineligible

N/A

Extended-

Graduated

Ineligible

N/A

REPAYE

$60

$296

20 years

$32,358

$24,253

PAYE &

IBR (new

borrowers)

$60

$296

20 years

$39,517

$27,823

IBR (not

new

borrowers)

$90

$333

21 years,

10 months

$61,006

ICR

$195

$253

19 years,

6 months

$52,233

* Loan debt does not include any consolidation loans.

Combined Undergraduate & Graduate Loan Debt* of $60,000 in

Direct Unsubsidized Loans and Starting Income of $40,000

Repayment

Plan

Initial

Payment

Final

Payment

Repayment

Period

Total

Paid

Loan

Forgiveness

Standard

$666

10 years

$79,935

N/A

Graduated

$381

$1,143

10 years

$85,272

N/A

Extended-

Fixed

$387

25 years

$115,974

N/A

Extended-

Graduated

$300

$582

25 years

$126,173

N/A

REPAYE

$185

$612

25 years

$131,444

PAYE & IBR

(new

borrowers)

$185

$612

20 years

$97,705

$41,814

IBR (not new

borrowers)

$277

$666

18 years,

3 month

$107,905

ICR

$469

$588

13 years, 9

months

$89,468

Federal Student Aid | StudentAid.gov Page 3 of 6

How long will I be in repayment under each plan?

Under all four plans, any remaining loan balance is forgiven if your federal student loans aren’t fully repaid at the end of the repayment period. For any income-

driven repayment plan, periods of economic hardship deferment and periods of repayment under certain other repayment plans will count toward your total

repayment period. Whether you will have a balance left to be forgiven at the end of your repayment period depends on a number of factors, such as how

quickly your income rises and how large your income is relative to your debt. Because of these factors, you may fully repay your loan before the end of your

repayment period.

Repayment Plan

Repayment Period

REPAYE Plan

20 years if all loans you are repaying under the plan were for undergraduate study

25 years if any loans you are repaying under the plan were for graduate or professional study

PAYE Plan

20 years

IBR Plan

20 years if you are a new borrower on or after July 1, 2014

25 years if you are not a new borrower on or after July 1, 2014

ICR Plan

25 years

Note: If you’re paying under an

income-driven repayment plan and

are eligible for Public Service Loan

Forgiveness, you may qualify for

forgiveness of any remaining Direct

Loan balance after you have made

10 years of qualifying payments.

Visit StudentAid.gov/publicservice to

learn more.

Who is eligible for income-driven repayment?

REPAYE Plan

Any borrower with eligible federal student loans may make payments under this plan.

PAYE and IBR Plans

Each of these plans has an eligibility requirement you must meet to qualify for the plan. To qualify, the payment you would be required to make under the

PAYE or IBR plan (based on your income and family size) must be less than what you would pay under the Standard Repayment Plan with a 10-year

repayment period.

If the amount you would have to pay under the PAYE or IBR plan (based on your income and family size) is more than what you would have to pay under the

10-year Standard Repayment Plan, you wouldn’t benefit from having your monthly payment amount based on your income, so you don’t qualify. Generally,

you’ll meet this requirement if your federal student loan debt is higher than your discretionary income or represents a significant portion of your annual income.

In addition to meeting the requirement described above, to qualify for the PAYE Plan you must also be a new borrower as of Oct. 1, 2007, and must have

received a disbursement of a Direct Loan on or after Oct. 1, 2011. You’re a new borrower if you had no outstanding balance on a Direct Loan or FFEL Program

loan when you received a Direct Loan or FFEL Program loan on or after Oct. 1, 2007.

Federal Student Aid | StudentAid.gov Page 4 of 6

ICR Plan

Any borrower with eligible federal student loans may make payments under this plan

Will I always pay the same amount each month under an income-driven

repayment plan?

No. Under all of the income-driven repayment plans, your required monthly payment amount may increase or decrease if your income or family size changes

from year to year. Each year you must “recertify” your income and family size. This means that you must provide your loan servicer with updated income and

family size information so that your servicer can recalculate your payment. You must do this even if there has been no change in your income or family size.

Your loan servicer will send you a reminder notice when it’s time for you to recertify. To recertify, you must submit another income-driven repayment plan

application. On the application, you’ll be asked to select the reason you’re submitting the application. Respond that you are submitting documentation of your

income for the annual recalculation of your payment amount.

Although you’re required to recertify your income and family size only once each year, if your income or family size changes significantly before your annual

certification date (for example, due to loss of employment), you can submit updated information and ask your servicer to recalculate your payment amount at

any time. To do this, submit a new application for an income-driven repayment plan. When asked to select the reason for submitting the application, respond

that you are submitting documentation early because you want your servicer to recalculate your payment immediately.

What types of federal student loans are eligible to be repaid under an

income-driven repayment plan?

Loan Type

REPAYE Plan

PAYE Plan

IBR Plan

ICR Plan

Direct Subsidized Loans

Eligible

Direct Unsubsidized Loans

Eligible

Direct PLUS Loans made to graduate or

professional students

Eligible

Direct PLUS Loans made to parents

Not eligible

Eligible if consolidated*

Direct Consolidation Loans that did not repay any

PLUS loans made to parents

Eligible

Direct Consolidation Loans that repaid PLUS loans

made to parents

Not eligible

Eligible

Federal Student Aid | StudentAid.gov Page 5 of 6

Loan Type

REPAYE Plan

PAYE Plan

IBR Plan

ICR Plan

Subsidized Federal Stafford Loans (from the FFEL

program)

Eligible if

consolidated*

Eligible if

consolidated*

Eligible

Eligible if consolidated*

Unsubsidized Federal Stafford Loans (from the

FFEL program)

Eligible if

consolidated*

Eligible if

consolidated*

Eligible

Eligible if consolidated*

FFEL

PLUS Loans made to graduate or professional

students

Eligible if

consolidated*

Eligible if

consolidated*

Eligible

Eligible if consolidated*

FFEL

PLUS Loans made to parents

Not eligible

Eligible if consolidated*

FFEL

Consolidation Loans that did not repay any

PLUS loans made to parents

Eligible if

consolidated*

Eligible if

consolidated*

Eligible

Eligible if consolidated*

FFEL

Consolidation Loans that repaid PLUS loans

made to parents

Not eligible

Eligible if consolidated*

Federal Perkins Loans

Eligible if

consolidated*

Eligible if

consolidated*

Eligible if consolidated*

*If a loan type is listed as “Eligible if consolidated,” this means that if you consolidate that loan type into a Direct Consolidation Loan, you can then repay the

consolidation loan under the income-driven plan.

Note that only federal student loans can be repaid under the income-driven plans. Private student loans are not eligible.

Is an income-driven repayment plan right for me?

Income-driven repayment plans usually lower your federal student loan payments. However, whenever you make lower payments or extend your repayment

period, you will likely pay more in interest over time—sometimes significantly more. In addition, under current Internal Revenue Service (IRS) rules, you may

be required to pay income tax on any amount that’s forgiven if you still have a remaining balance at the end of your repayment period.

How do I decide which income-driven repayment plan to choose?

If you’ve decided that an income-driven repayment plan is right for you, you’ll want to choose the plan that provides the most benefit to you based on your

individual circumstances. Although all four income-driven plans allow you to make a monthly payment based on your income, the plans differ in terms of who

qualifies, how much you have to pay each month, the length of the repayment period, and the types of loans that can be repaid under the plan.

If you have only Direct Loans, you can choose from all four income-driven repayment plans. If you’re not sure which plan to choose, you have the option of

requesting the income-driven plan that provides the lowest payment amount. Your servicer will determine which plans you qualify for and will then place you on

the plan with the lowest monthly payment. If you have FFEL Program loans, your only income-driven repayment plan option is the IBR Plan. However, if you

Federal Student Aid | StudentAid.gov Page 6 of 6

consolidate your FFEL Program loans into a Direct Consolidation Loan, you’ll then have access to the REPAYE, PAYE, and ICR plans. Find out more about

loan consolidation at StudentAid.gov/consolidation.

How do I apply for an income-driven plan?

Before you apply for an income-driven repayment plan, contact your loan servicer if you have any questions. Your loan servicer will help you decide whether

one of these plans is right for you.

To apply, you must submit an application called the Income-Driven Repayment Plan Request. You can submit the application online at StudentLoans.gov or on

a paper form, which you can get from your loan servicer. The application allows you to select an income-driven repayment plan by name, or to request that

your loan servicer determine what income-driven plan or plans you qualify for, and then place you on the income-driven plan with the lowest monthly payment

amount.

When you apply, you’ll be asked to provide income information that will be used to determine your eligibility for the PAYE or IBR plans and to calculate your

monthly payment amount under all income-driven repayment plans. This may be either your adjusted gross income (AGI) or alternative documentation of

income.

Your AGI will be used if

 you filed a federal income tax return in the past two years, and

 your current income isn’t significantly different from the income reported on your most recent federal income tax return.

You can provide your AGI in one of the following ways:

 Apply using the online Income-Driven Repayment Plan Request and use the IRS Data Retrieval Tool in the application to transfer income information from

your federal income tax return.

 Use the paper Income-Driven Repayment Plan Request and provide a paper copy of your most recently filed federal income tax return or IRS tax return

transcript.

If you haven’t filed a federal income tax return in the past two years, or if your current income is significantly different from the income reported on your most

recent federal income tax return (for example, if you lost your job or have experienced a drop in income), alternative documentation of your income will be used

to determine your eligibility and calculate your monthly payment amount. You can provide alternative documentation in one of the following ways:

 If you currently receive taxable income, you must submit a paper Income-Driven Repayment Plan Request with alternative documentation of your income,

such as a pay stub.

 If you currently don’t have any income or if you receive only untaxed income, you can indicate that on the online or paper application. In this case, you’re

not required to supply further documentation of your income.

February 2016