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What You Need to Know About Income-Driven Repayment Plans in 2026
By
Kayla Korzekwinski
Kayla Korzekwinski is a Scholarships360 content writer. She earned her BA from the University of North Carolina at Chapel Hill, where she studied Advertising/PR, Rhetorical Communication, and Anthropology. Kayla has worked on communications for non-profits and student organizations. She loves to write and come up with new ways to express ideas.
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Maria Geiger is Director of Scholarship Services at Scholarships360. She is a former online educational technology instructor and adjunct writing instructor. In addition to education reform, Maria’s interests include viewpoint diversity, blended/flipped learning, digital communication, and integrating media/web tools into the curriculum to better facilitate student engagement. Maria earned both a B.A. and an M.A. in English Literature from Monmouth University, an M. Ed. in Education from Monmouth University, and a Virtual Online Teaching Certificate (VOLT) from the University of Pennsylvania.
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The U.S. federal government used to offer four income-driven repayment plans (IDR) as alternatives to the standard 10-year repayment plan. But recent changes have now made it so that there is only one primary income-driven repayment (IDR) plan for loans dispersed after July 1, 2026. That being said, some borrowers may have temporary access to older plans until 2028. In this article, we’ll dive into everything you need to know about the newest plan and older plans.
Also read: Best student loan repayment plans
What is an income-driven repayment plan?
An income-driven repayment plan (IDR) allows borrowers with federal student loans to adjust their monthly payment based on their income and family size. If your monthly student loan payments are too high, one of these plans may help you get a lower monthly payment amount!
The newest repayment plan: Repayment Assistance Plan (RAP)
Any borrower who takes out a loan on or after July 1, 2026 will only have access to the new Repayment Assistance Plan (RAP). This plan will eventually replace all other current IDR plans, include SAVE, PAYE, the IBR plan, and the IBC plan.
Similarities and difference between new and old IDR plans
The new and old IDR plans are different in a few categories, but there are also some similarities.
| Plan Feature | New RAP plan | Old IDR plans |
|---|---|---|
| Loans that are eligible | Subsidized, Unsubsidized, Grad PLUS, and Consolidation Loans (Consolidated Parent PLUS Loans may be eligible for some plans) | Subsidized, Unsubsidized, Grad PLUS, and Consolidation Loans (excluding excepted Consolidation Loans that include a Parent PLUS Loan) |
| Income basis for monthly payment | Discretionary income (Adjusted Gross Income above 150% to 225% of FPL) | Total Adjusted Gross Income |
| Percentage of income basis used for monthly payment calculation | 5% to 20% | 1% to 10% for AGIs above $10,000; for AGIs of $10,000 or less, monthly payment is $10
For AGI’s above $100,000, percentage is capped at 10% |
| Minimum monthly payment | $0 | $10 |
| Dependent-based reductions in monthly payment | None | $50 per dependent |
| Maximum repayment period | 10 to 25 years | 30 years |
| Interest subsidy | Varies | All loans in negative amortization (meaning loan payments are too low to cover the interest due) |
| Matching principal payment | None | For borrowers who repay less than $50 in monthly principal, it is equal to the lesser of $50 or monthly payment, minus monthly principal repaid |
Old types of income-driven repayment plans (still eligible to borrowers before July 1, 2026)
The U.S. department of education offers four income-driven repayment plans:
- Saving on a valuable education (SAVE) plan
- Pay as you earn (PAYE)
- Income-based repayment (IBR) plan
- Income-contingent repayment (ICR) plan
Saving on a Valuable Education (SAVE)
The SAVE Plan is the news IDR plan for federal student loans. Under SAVE, your monthly payment amount is based on your discretionary income which is the difference between your adjusted gross income (AGI) and 225% of the U.S. Department of Health and Human Services Poverty Guideline amount for your family size.
Additionally, the SAVE plan eliminates 100% of remaining monthly interest for both subsidized and unsubsidized loans after you make a full scheduled payment. This will prevent any unpaid interest from accruing which can prevent furthering your debt amount.
The SAVE plan also excludes any spouse’s income from being considered for your total income if you file separately. This results in a simpler application process and typically a greater amount of aid than if you had to be considered based on both incomes.
Pay As You Earn (PAYE)
The PAYE plan has monthly payments that are capped at 10% of your annual income. The payment period is 20 years. PAYE can only be used on federal Direct loans.
Under PAYE, monthly payments will never be more than what you would have paid on the standard 10-year plan. If at any point your income increases so that you would pay more than the standard plan, you will remain in PAYE but you will pay based on the 10-year plan.
Therefore, you cannot enroll in PAYE if your monthly payments on the plan would be higher than the 10-year plan. Generally, you can qualify for PAYE if your debt is a significant portion of your annual income. Also, to enroll in PAYE, you must be a new borrower. This means you must have not had an outstanding balance on a Direct or FFEL loan on or after October 1, 2007. You must also have received a disbursement of a Direct loan on or after October 1, 2011.
PAYE may be a good fit if you have graduate/professional school loans or you have low earning potential. Another important thing to note about PAYE is if you’re married, and you and your spouse file taxes jointly, your spouse’s income will be factored into your monthly payments. If you file taxes separately, payments will be based only on your income.
Also read: Navigating different types of student loans
Income-Based Repayment (IBR)
The Income-Based Repayment plan caps monthly payments at 10% of annual income if you are a new borrower on or after July 1, 2014, meaning you had no outstanding loan balance. If you are not a new borrower on or after July 1, 2014, the monthly payment is 15% of annual income. The payment period is 20 years for new borrowers, or 25 years for those who are not new borrowers.
Like PAYE, you can only enroll in IBR if your monthly payments would be less than what you would have paid on the standard 10-year plan. If your income increases to the point that monthly payments would be more than the standard plan, you will remain in IBR, but pay based on the 10-year plan.
IBR is a good fit if you don’t qualify for PAYE or have FFEL loans.
Income-Contingent Repayment (ICR)
On the Income-Contingent Repayment plan, monthly payments are the lesser of 20% of annual income or what you would pay on a 12-year plan with a fixed payment that is adjusted according to income. ICR has a 25-year payment period.
This plan can be used on all Direct student loans. It is also the only plan that allows you to pay parent PLUS loans. The parent PLUS loans must first be consolidated into a Direct consolidation loan.
Payments under ICR are always based on income and family size. So, there is a chance that you could pay more monthly under this plan than the standard plan. This plan is ideal if you are a parent looking to pay off PLUS loans.
Income-driven repayment plans are a great way to lower your monthly student loan payments and avoid issues such as default. The 4 IDRs have such nuanced requirements that it can be challenging to make a decision. The easiest way to select an IDR that’s best for you is by talking to your loan servicer. They can give advice on which plan would be the best fit for your income and loan balance.
Related: How to lower student loan payments
Comparing Income-driven repayment plans
Income-driven repayment advantages
Lower monthly payments
One of the biggest advantages of IDR is that the monthly payments will typically be lower as they are based on your Adjusted Gross Income (AGI). Typically, repayment plans will provide borrowers with the lowest monthly loan payment available.
The remaining balance is forgiven
The remaining student loan balance is forgiven after 30 years of repayment.
Credit scores are not impacted
Income-driven repayment plans do not hurt borrower’s credit scores. This is important because it means your credit score will not be penalized or affected for having a IDR plan.
Income-driven repayment disadvantages
More interest over time
Income-driven plans can extend the repayment time period from the standard 10 years to 30 years. Therefore, if you are paying your loan for a longer amount of time then more interest will accrue on your loans.
Taxes on the forgiven balance
If you have a balance left at the end of the repayment term, the forgiven amount will normally be taxed as income. However, if you qualify for Public Service Loan Forgiveness, you will not be taxed by the federal government but you may be taxed by your state.
Spouse’s information can factor in
If you are married your spouse’s information may be factored into your student loan payment amount. Be sure to check if your income-driven repayment plan will use your income or a combined income.