What Is an IDR Plan? Income-Driven Repayment in Simple Words

November 7, 2026 Invest Clarity Path Team

Student loan payments can feel hard to understand, especially when the monthly amount looks too high for your pay. An income-driven repayment plan, often called an IDR plan, can help you see a lower monthly amount that is linked to what you earn.

This guide explains what an IDR plan is in plain words. It covers how payments are worked out, the plan names StudentAid.gov lists today, how often you must renew, and what happens with interest and forgiveness. It also explains why the plans are changing.

The short answer

An income-driven repayment plan sets your monthly payment from your income and family size, instead of using only your loan balance and interest rate. You renew it every year, and the amount can go up or down when your income or family size changes. After the plan repayment period, StudentAid.gov says your remaining balance may be discharged.

What does income-driven repayment mean?

Income-driven repayment is a way to repay federal student loans. The name tells you the main idea. Your monthly payment is driven by your income, not only by the size of your loan. StudentAid.gov, the official site of the U.S. Department of Education, says the plans base your monthly payment amount on your income and family size. That is why the same loan balance can lead to a different monthly payment for two people with different incomes.

A payment under an IDR plan can be as low as $0. StudentAid.gov states this directly. If your income is low enough, your monthly payment could be as low as $0. That does not mean the loan has gone away. Interest can still build up, and you still need to renew the plan each year.

How your payment is worked out

Your servicer looks at your income and how many people are in your family. StudentAid.gov says your payment amount is based on your income and family size. Each plan has its own formula, so the result can differ from one plan to another. The number of dependents you have can also change your payment under some plans.

The plans do not all treat the standard payment in the same way. Under the Pay As You Earn Plan, or PAYE, and Income-Based Repayment, or IBR, your monthly payment amount will never be more than the 10-year Standard Repayment Plan amount. Under the Income-Contingent Repayment Plan, or ICR, and the Repayment Assistance Plan, or RAP, your payment amount is not capped in this way.

The IDR plan names StudentAid.gov lists today

StudentAid.gov lists four IDR plans today. Their names are not all the same in how they work, and two of them are set to end in the future.

Repayment Assistance Plan, or RAP

This is the new IDR plan. Its payment is based on a percentage of your adjusted gross income, from 1 percent to 10 percent, divided by 12 months. The amount can be reduced by $50 for each dependent. RAP covers Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans for graduate or professional students, and Direct Consolidation Loans that do not include Direct PLUS Loans for parents. The repayment period for RAP is 30 years.

Income-Based Repayment, or IBR

For a borrower who is a new borrower on or after July 1, 2014, and before July 1, 2026, the payment is 10 percent of discretionary income, and the repayment period is 20 years. For a borrower who is not a new borrower on or after July 1, 2014, the payment is 15 percent of discretionary income, and the repayment period is 25 years.

Income-Contingent Repayment, or ICR

The payment is the lesser of 20 percent of discretionary income or what you would pay on a repayment plan with a fixed payment over 12 years, adjusted for your income. The repayment period is 25 years. StudentAid.gov adds a note that the One Big Beautiful Bill Act eliminates the ICR and PAYE Plans in the future, no later than July 1, 2028.

Pay As You Earn, or PAYE

The payment is 10 percent of discretionary income, and the repayment period is 20 years. PAYE covers Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans for graduate or professional students, and Direct Consolidation Loans that do not include Direct PLUS Loans for parents. This plan will also be eliminated in the future, no later than July 1, 2028, under the One Big Beautiful Bill Act.

Who can use an IDR plan?

Defaulted loans are not eligible for any income-driven repayment plan. StudentAid.gov states this clearly. If your loan is in default, you need to get out of default first, through a route the official site lists, such as rehabilitation or consolidation, before you can use an IDR plan. The page also says that to apply online, most people complete the income-driven repayment application in 10 minutes or less.

Annual recertification: you must renew every year

You must recertify every year under an IDR plan. That means you tell your servicer about your income and family size again, once a year. StudentAid.gov says you must recertify every year. It also says to submit your recertification when it is due, as some plans may increase your monthly payment amount to the 10-year Standard Repayment Plan amount if you fail to recertify on time.

If your income goes up, your payment may go up at the next renewal. If your income goes down, or your family size grows, your payment may go down. The yearly check keeps your payment linked to your current situation, instead of to the income you had when you first applied.

Interest and forgiveness basics

A lower monthly payment does not always mean you pay less in total. StudentAid.gov says that even if you qualify for a small monthly payment, you may pay more in interest over time, and sometimes significantly more. This is because a smaller payment can leave more of your balance unpaid for longer, and interest keeps adding up while the loan is in repayment.

Forgiveness is a separate idea from a low payment. Under an IDR plan, your remaining loan balance may be discharged by the end of the repayment period. That period is 20, 25, or 30 years, depending on the plan. StudentAid.gov says that under current IRS rules, you might be required to pay income tax on the amount discharged if you still have a remaining loan balance at the end of your repayment period.

The plans are changing: check StudentAid.gov before you choose

The rules in this guide are changing under a new law. StudentAid.gov has updated its income-driven repayment page to reflect the changes under the One Big Beautiful Bill Act, which was signed into law on July 4, 2025. The page says that the act made significant changes to income-driven repayment plans.

The clearest change is about the older plans. The One Big Beautiful Bill Act eliminates the ICR and PAYE Plans in the future, no later than July 1, 2028. The repayment plans page also says that if your eligible loans were taken out before July 1, 2026, you are permitted to access IBR, ICR, and PAYE on or after July 1, 2026. It adds that there is no restriction on enrolling in them unless you receive a disbursement on a new loan on or after July 1, 2026. Once you receive the first disbursement on a loan as of July 1, 2026, you lose eligibility for IBR, ICR, and PAYE. Eligible loans will have access to RAP.

StudentAid.gov also gives a warning for one group of borrowers. It says SAVE borrowers have been notified that they have 90 days to choose another repayment plan, and that until they select a new repayment plan, the full amount of interest will keep adding up, which may increase their loan balances. This guide does not give a date for any other change, because StudentAid.gov does not state one on the pages checked for this guide.

Quick answers

What is an IDR plan?

An income-driven repayment plan sets your monthly federal student loan payment from your income and family size. StudentAid.gov says the payment can be as low as $0 if your income is low enough. You must recertify every year, and your remaining balance may be discharged by the end of the repayment period.

Which IDR plans does StudentAid.gov list today?

StudentAid.gov lists the Repayment Assistance Plan, Income-Based Repayment, Income-Contingent Repayment, and Pay As You Earn. It notes that the One Big Beautiful Bill Act eliminates ICR and PAYE in the future, no later than July 1, 2028.

Do I need to renew an IDR plan each year?

Yes. StudentAid.gov says you must recertify every year. It also says that if you fail to recertify on time, some plans may increase your monthly payment amount to the 10-year Standard Repayment Plan amount.

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