Income-Driven Repayment (IDR) Plans: IBR, RAP, and SAVE

An income-driven repayment (IDR) plan caps your monthly federal student loan payment at a percentage of your income instead of the amount needed to pay the loan off in ten years. If your income is low enough, the calculated payment can be zero. After a cascade of changes in 2026, income-driven repayment plans now come down to two real options for most federal borrowers: Income-Based Repayment (IBR), which is open now, and the new Repayment Assistance Plan (RAP), which takes effect no later than July 1, 2026. Only Federal Direct Loans qualify; Federal Family Education Loan (FFEL) borrowers have to consolidate into a Direct Consolidation Loan first.¹

Which Plans Still Exist in 2026

Three things happened this year that changed the menu. On March 9, 2026, the U.S. Court of Appeals for the Eighth Circuit vacated the Saving on a Valuable Education (SAVE) plan in its entirety. More than seven million borrowers who had been parked in forbearance during the litigation now have to choose a different plan or get moved by their servicer.²

The One Big Beautiful Bill Act (OBBB) then created RAP and loosened IBR, eliminating the old “partial financial hardship” test so borrowers who used to earn too much for IBR can now enroll.³ The same law phases out SAVE, Pay As You Earn (PAYE), and Income-Contingent Repayment (ICR) by July 1, 2028. If you are already in PAYE or ICR, you can stay there until that date; new enrollment is tightening as the transition unfolds.

So the practical landscape is: IBR, RAP, and a two-year wind-down for PAYE and ICR enrollees.

Income-Based Repayment (IBR)

IBR is the longest-running IDR plan still accepting new borrowers and is now the main option until RAP goes live. It splits into two versions based on when you first borrowed:

Loans first taken out before July 1, 2014: you pay 15% of discretionary income, with forgiveness after 25 years.
Loans first taken out on or after July 1, 2014: you pay 10% of discretionary income, with forgiveness after 20 years.¹

Your IBR payment is capped at what you would owe on the standard 10-year plan. That cap is set the day you enroll and does not move up later even if your income rises. If your income drops, the payment recalculates downward at your next recertification.¹

The partial financial hardship requirement is gone. Borrowers with loans issued on or after July 1, 2014, and before July 1, 2026, who used to earn too much for IBR can now enroll at the 10% rate with the 20-year term.³

How the IBR Payment Is Calculated

“Discretionary income” under IBR is not take-home pay. Subtract 150% of the Federal Poverty Guideline (FPG) for your family size from your adjusted gross income (AGI). The 2026 FPG for a single person in the 48 contiguous states is $15,960, so 150% is $23,940.⁴

Worked example for a single borrower earning $50,000 on the newer 10% tier: $50,000 minus $23,940 is $26,060 in discretionary income. Ten percent of that is $2,606 per year, or about $217 per month. On the older 15% tier, the same borrower pays about $326. Family size matters because more income gets shielded; a family of four has a 2026 FPG of $33,000, so 150% is $49,500, and far less of your AGI feeds into the formula.⁴

The Repayment Assistance Plan (RAP)

RAP is the new plan created by the OBBB, effective no later than July 1, 2026. It abandons the discretionary-income approach and uses your total AGI on a sliding scale.⁵

$10,000 or less: $10 per month (flat)
$10,001–$20,000: 1% of AGI
$20,001–$30,000: 2% of AGI
$30,001–$40,000: 3% of AGI
$40,001–$50,000: 4% of AGI
$50,001–$60,000: 5% of AGI
$60,001–$70,000: 6% of AGI
$70,001–$80,000: 7% of AGI
$80,001–$90,000: 8% of AGI
$90,001–$100,000: 9% of AGI
Above $100,000: 10% of AGI (capped)⁵

Divide the annual figure from the bracket by 12 to get the monthly payment, then subtract $50 for each dependent you claim on your tax return. RAP does not distinguish between undergraduate and graduate debt. Subsidized, unsubsidized, Graduate PLUS, and consolidation loans are all eligible.⁵

Two subsidies are built in. If your payment does not cover all the interest accruing that month, the unpaid interest is waived instead of being added to your balance. And if your payment does not reduce your principal by at least $50, a subsidy makes up the difference so the balance drops by at least $50 each month. The trade-off is time: RAP forgives any remaining balance after 30 years, not 20 or 25. Payments on RAP count toward Public Service Loan Forgiveness.³

How Marriage and Tax Filing Affect Your Payment

Filing status controls whether your spouse’s income enters the formula. Under IBR, filing jointly means the servicer uses combined household income to compute one payment, then splits it between the two of you based on each person’s share of the federal loan balance. Filing separately means only your individual income is counted.⁶

Under RAP, filing separately also keeps your spouse’s income out of the calculation. The catch is that your dependent count is limited to those claimed on your individual return, which shrinks the $50-per-dependent reduction.

Filing separately has real tax costs. You lose the student loan interest deduction, the earned income tax credit, and the childcare tax credit, and you face less favorable tax brackets. For some borrowers the loan savings outweigh the tax hit; for others they do not. Running both scenarios with a tax professional before you file is the only way to know.⁶

Parent PLUS Borrowers: The June 30, 2026 Deadline

Parent PLUS loans cannot enter IDR directly. You have to consolidate them into a Direct Consolidation Loan first. Historically that consolidation loan could only access ICR, the most expensive IDR plan. The OBBB opened IBR to Parent PLUS consolidation loans as well.³

There is a hard cutoff. Your Direct Consolidation Loan must be disbursed by June 30, 2026, to remain eligible for income-driven repayment. Any Parent PLUS consolidation completed after that date is permanently locked out of IDR, including IBR and RAP, leaving the standard repayment plan as the only option. Consolidation applications take several weeks, so if you hold Parent PLUS loans and have not consolidated, starting now is the point. Select ICR as the initial plan on the consolidation application and then switch to IBR once enrolled. Parent PLUS borrowers already consolidated and sitting in ICR have until July 1, 2028, to move into IBR.

Applying and Recertifying Each Year

Apply at StudentAid.gov. The form takes most borrowers about ten minutes. You will need your FSA ID, your most recent AGI from your federal tax return, and your spouse’s information if that applies. If your income has dropped significantly since you last filed taxes, you can submit alternative documentation such as recent pay stubs or an employer letter.⁷ Your servicer verifies income and family size, then calculates the new monthly payment. FFEL borrowers consolidate into a Direct Consolidation Loan first.⁸

IDR is not set-and-forget. You recertify income and family size every year. If you consented to let the Department of Education pull your federal tax information, your plan may be autorecertified. Otherwise it is on you to update by the deadline.⁷

Missing recertification under IBR has teeth. Any unpaid interest capitalizes onto your principal, so you start paying interest on a bigger balance. Your monthly payment jumps to the 10-year standard plan amount based on what you owed when you first entered IBR. You can get back to an income-based payment by submitting updated income information, but the capitalized interest does not come off.¹ If your income drops before your usual recertification date, you can recertify early online.

Forgiveness at the End of the Term

Each IDR plan forgives whatever balance is left after a set number of qualifying monthly payments:

IBR, pre-July 2014 borrowers: 25 years
IBR, post-July 2014 borrowers: 20 years¹
PAYE: 20 years
ICR: 25 years⁹
RAP: 30 years

Months where your calculated payment is $0 still count as long as you stay enrolled. Forgiveness covers both remaining principal and accrued interest.

Public Service Loan Forgiveness

PSLF is the fast track: 120 qualifying monthly payments, which is ten years. You have to work full-time (at least 30 hours a week on average, combinable across employers) for a government body or a qualifying nonprofit, and your Direct Loans have to be on an IDR plan or another qualifying plan. The 120 payments do not have to be consecutive.¹⁰ RAP payments count toward PSLF, which makes RAP a workable base for public-service workers who want a low payment while running out the ten-year clock.³

The Tax Bill at the End of an IDR Term

IDR forgiveness is treated as taxable ordinary income by the IRS. If $80,000 is forgiven after 25 years of IBR, your taxable income jumps by $80,000 that year, which can produce a tax bill of $10,000 or more depending on your bracket. The American Rescue Plan Act suspended that treatment for forgiveness between December 31, 2020, and January 1, 2026, but that exemption has expired. Any IDR forgiveness granted on or after January 1, 2026, is again taxable at the federal level.¹¹

PSLF is the exception. Balances forgiven under PSLF are excluded from gross income under federal tax law, and always have been.¹¹ State tax treatment varies: some states follow federal rules, others tax forgiven student debt regardless. If you are close to forgiveness, factor in both federal and state exposure and consider setting money aside or arranging an IRS installment agreement for the year it hits.

If You Were on SAVE

If you enrolled in or applied for SAVE before it was struck down, your loans were likely placed in administrative forbearance during the litigation. You now need to pick a new plan. If you do nothing, your servicer will move you, and the default landing spot is often standard repayment with a higher monthly payment and no forgiveness track.²

Time spent in certain forbearances, including the SAVE-related forbearance, can count toward loan forgiveness under provisions from the July 2023 IDR rule. The practical next step is to log into StudentAid.gov, review your options, and either enroll in IBR now or wait a short period for RAP to open. The one thing not to do is let the servicer pick for you.²

1
Federal Student Aid. Income-Driven Repayment Plans
2
Federal Student Aid. IDR Plan Court Actions – Impact on Borrowers
3
Federal Student Aid Partners. GEN-25-04 Federal Student Loan Program Provisions Effective Upon Enactment Under One Big Beautiful Bill Act
4
HHS ASPE. 2026 Poverty Guidelines
5
Congressional Research Service. The Repayment Assistance Plan (RAP) in PL 119-21, the FY2025 Budget Reconciliation
6
Federal Student Aid. 4 Things to Know About Marriage and Student Loan Debt
7
Federal Student Aid. Income-Driven Repayment (IDR) Plan Application
8
Federal Student Aid. What to Know About Federal Family Education Loan FFEL Program Loans
9
Edfinancial Services. Edfinancial Services – Income-Contingent Repayment (ICR)
10
Federal Student Aid. Public Service Loan Forgiveness FAQs
11
Office of the Law Revision Counsel. 26 USC 108 – Income From Discharge of Indebtedness