Income-Driven Repayment Plans: IBR, PAYE, ICR, and RAP

Federal income-driven repayment plans cap your monthly student loan payment based on what you earn instead of what you owe, and the menu changed sharply in 2026. After a federal appeals court struck down the SAVE plan, Income-Based Repayment (IBR) became the primary option for most borrowers. Pay As You Earn (PAYE) and Income-Contingent Repayment (ICR) remain open for now but close to new enrollment on July 1, 2027, and a new Repayment Assistance Plan (RAP) launches July 1, 2026, for newer loans. Each plan uses a different formula, sets a different forgiveness timeline, and treats a spouse’s income differently.

Where the Plans Stand Now

A federal appeals court struck down SAVE on March 10, 2026, finding that the Department of Education exceeded its authority when it created the plan’s terms, including the 225% poverty threshold and the 5% payment rate on undergraduate debt.¹ SAVE is no longer operational even though its regulatory text still appears in 34 CFR § 685.209 while formal removal moves through rulemaking.

If you were enrolled in SAVE, PAYE, or ICR, you have to move to either IBR or RAP by July 1, 2028, or your servicer will auto-enroll you. Borrowers already on IBR can stay on IBR. Anyone on SAVE at the time of the ruling can switch to IBR now if eligible, or wait for RAP in July 2026.

Income-Based Repayment (IBR)

IBR is the broadest income-driven plan and the one most borrowers will end up using. It covers Direct Loans and older Federal Family Education Loan (FFEL) Program loans, making it the only IDR option for borrowers still holding FFEL debt without consolidating.² To enroll, you have to show a partial financial hardship, meaning your payment on the standard ten-year plan would exceed the IBR-calculated percentage of your discretionary income.

IBR has two versions depending on when you first borrowed:

New borrowers (first loan on or after July 1, 2014): 10% of discretionary income, remaining balance forgiven after 20 years of qualifying payments.
Older borrowers (first loan before July 1, 2014): 15% of discretionary income, forgiveness after 25 years.

Both versions define discretionary income as everything you earn above 150% of the federal poverty guideline for your family size. Parent PLUS borrowers cannot use IBR, even after consolidating.

Pay As You Earn (PAYE)

PAYE is closing to new enrollees on July 1, 2027, after the Department of Education extended the original 2024 cutoff.³ If you’re already on PAYE, you can stay. If you leave voluntarily after that deadline, you cannot re-enroll.

PAYE limits eligibility to “new borrowers” who had no outstanding balance on any Direct or FFEL loan as of October 1, 2007, and who received at least one Direct Loan disbursement on or after October 1, 2011.⁴ You also need to show a partial financial hardship. Payments are 10% of discretionary income (using the 150% poverty threshold), and forgiveness comes after 20 years. Parent PLUS loans are not eligible.

Income-Contingent Repayment (ICR)

ICR is the highest-payment IDR plan and the only income-driven option for Parent PLUS borrowers who consolidate their loans into a Direct Consolidation Loan.⁵ Like PAYE, ICR closes to most new enrollees on July 1, 2027, with a carve-out for borrowers repaying consolidated Parent PLUS debt.

ICR does not require partial financial hardship. Anyone with eligible Direct Loans can enroll. Your payment is the lesser of 20% of discretionary income or the amount you would pay on a fixed twelve-year schedule adjusted for income. The catch: ICR calculates discretionary income against only 100% of the federal poverty guideline, not 150%, so a larger share of your income counts as discretionary and payments run higher. Forgiveness arrives after 25 years.⁶

For borrowers who consolidate Parent PLUS loans after July 1, 2025, ICR is the only IDR plan available. The regulation explicitly bars those consolidation loans from IBR, PAYE, and future IDR plans.⁵

The Repayment Assistance Plan (RAP)

Starting July 1, 2026, new federal student loan borrowers can access RAP, which replaces SAVE in the regulatory framework.⁷ RAP sets payments at 1% to 10% of adjusted gross income, with a $10 monthly minimum for borrowers earning under $10,000 a year. Remaining balances are forgiven after 30 years.

Parent PLUS loans are not eligible for RAP. Borrowers currently on PAYE, ICR, or the defunct SAVE plan must transition to IBR or RAP by July 1, 2028. Family size under RAP counts only dependents claimed on your individual tax return if you file separately, which is narrower than the household measure the older plans use.

How Your Monthly Payment Is Calculated

Every IDR plan works the same way at the top: subtract a protected amount from your adjusted gross income, then take a percentage of what remains. The protected amount and the percentage change by plan.

For IBR and PAYE, discretionary income is everything you earn above 150% of the federal poverty guideline for your family size. In 2026, the guideline for a single person in the 48 contiguous states is $15,960, so 150% of that is $23,940.⁸ A single borrower earning $40,000 would have $16,060 in discretionary income under IBR or PAYE. Under ICR, that same borrower would have $24,040 in discretionary income, because ICR only shields 100% of the guideline.

Then the percentages apply:

IBR (post-July 2014 borrowers): 10% of discretionary income
IBR (pre-July 2014 borrowers): 15% of discretionary income
PAYE: 10% of discretionary income
ICR: 20% of discretionary income, or a twelve-year fixed payment adjusted for income, whichever is lower

If your income falls at or below the protected threshold, the formula produces a $0 monthly payment, and a $0 payment still counts as a qualifying payment toward forgiveness.⁹ Poverty guidelines update every year, so your protected amount rises with inflation even if your paycheck doesn’t.

How Marriage and Filing Status Change the Numbers

Your tax filing status determines whether your spouse’s income enters the calculation. Under IBR, PAYE, and ICR, married borrowers who file jointly have both incomes counted. File separately and only your individual income is used.¹⁰

Filing separately can lower a payment, but it costs you the student loan interest deduction, the earned income tax credit, and access to more favorable tax brackets. The math is case-specific. Run it both ways with a tax professional before choosing.

Family size matters too. Under IBR, PAYE, and ICR, family size includes you, your spouse if married, your dependents, any unborn children expected during the certification year, and other people living with you who receive more than half their support from you.⁷ A larger family raises the poverty threshold, which lowers your payment. RAP counts family size more narrowly.

Forgiveness Timelines

Any remaining balance is forgiven after a set number of years of qualifying payments:⁶

PAYE: 20 years (240 payments)
IBR (post-July 2014 borrowers): 20 years (240 payments)
IBR (pre-July 2014 borrowers): 25 years (300 payments)
ICR: 25 years (300 payments)
RAP: 30 years

Months with a $0 required payment count toward the total, as do certain deferment and forbearance periods. The clock does not reset when your income rises and your payment increases. It can reset with consolidation, discussed below.

What You Owe in Tax When a Balance Is Forgiven

The temporary federal tax exclusion for forgiven student loan debt under the American Rescue Plan Act expired on December 31, 2025.¹¹ Any balance forgiven in 2026 or later is treated as ordinary taxable income. A $50,000 balance forgiven after 20 years on PAYE is $50,000 of income in the year of discharge. Your lender will issue a Form 1099-C, and you owe federal income tax on the amount.¹²

There is one meaningful exclusion. If your total liabilities exceed your total assets at the moment of discharge, you qualify as insolvent and can exclude forgiven debt from taxable income up to the amount of your insolvency by filing IRS Form 982.¹³ Borrowers reaching the end of a 20- or 25-year IDR timeline often qualify, but you have to document your financial position carefully in the year forgiveness hits. Plan for the tax bill years ahead, not the January after.

Public Service Loan Forgiveness and IDR

If you work full-time for a qualifying public service employer, payments made under IBR, PAYE, ICR, and RAP all count toward the 120 qualifying payments required for Public Service Loan Forgiveness (PSLF).¹⁴ PSLF forgives the remaining balance after 10 years, and the forgiven amount is not taxable under current law.

Standard ten-year payments also technically qualify, but after 120 of those you’ve already paid the loan off. To actually benefit from PSLF, you need an IDR plan producing lower payments that leave a balance at the ten-year mark. Months with a $0 payment count toward PSLF as long as you’re employed full-time by a qualifying employer during that time.⁹

How to Apply

The IDR Request form lives on StudentAid.gov and most people finish in about 10 minutes.¹⁵ Have your most recent federal tax return ready and know your current family size. If your income has changed significantly since you last filed, you can provide alternative documentation like recent pay stubs.

The IRS Data Retrieval Tool pulls your tax data straight into the application, which is the fastest option. Skip it and you upload tax transcripts or pay records manually. You can pick a specific plan or ask the servicer to place you on whichever plan produces the lowest payment. Processing typically takes a couple of weeks, though delays are common; during the wait, your servicer may place your loans in administrative forbearance so you don’t miss a payment.¹⁶

Recertify Every Year

IDR enrollment is not set-and-forget. Every year, you have to submit updated income and family size information. Your servicer must notify you at least 30 days before your recertification deadline.

Missing that deadline is one of the most expensive mistakes in student loan management. Your payment reverts to the standard ten-year amount, which can be hundreds or thousands more per month. On IBR specifically, any accumulated unpaid interest capitalizes if you fail to recertify, meaning it’s added to principal and starts accruing interest of its own. Consenting to auto-recertification lets the Department of Education pull your tax data annually without a form from you, but you still need to update family size by hand if it changes. Leaving IBR voluntarily also triggers interest capitalization by statute.

How Consolidation Changes Your Options

Consolidating federal loans into a Direct Consolidation Loan can open IDR plans your original loans couldn’t reach, but the trade-offs are easy to miss.

The most common reason to consolidate is Parent PLUS debt. Parent PLUS loans are excluded from IBR, PAYE, and RAP. The only way to get income-driven payments on Parent PLUS debt is to consolidate into a Direct Consolidation Loan and enroll in ICR. For consolidations completed after July 1, 2025, ICR is the only IDR plan available for loans that include Parent PLUS debt.⁵

Consolidation also affects your forgiveness payment count. For consolidations completed after July 1, 2024, the new loan receives a weighted average of the payment counts from the underlying loans, rather than the highest count among them. Combine a loan with 10 years of credit and a newer loan with 2 years of credit and you don’t get 10 years. You get a blended number based on the balances. Run the weighted-average math before consolidating, especially if any single loan is close to forgiveness.

1
U.S. Department of Education. U.S. Department of Education Announces Next Steps for Borrowers Enrolled in Unlawful SAVE Plan
2
eCFR. 34 CFR 685.209 – Income-Driven Repayment Plans
3
Federal Student Aid Partners. Income Contingent Repayment Plan Options
4
eCFR. 34 CFR 685.209 – Income-Driven Repayment Plans
5
eCFR. 34 CFR 685.209 – Income-Driven Repayment Plans
6
Federal Student Aid. Payment Count Adjustments Toward Income-Driven Repayment and Public Service Loan Forgiveness
7
Federal Student Aid. Income-Driven Repayment (IDR) Plan Request
8
HHS Office of the Assistant Secretary for Planning and Evaluation. 2026 Poverty Guidelines
9
Federal Student Aid. Income-Driven Repayment Plans
10
Federal Student Aid. 4 Things to Know About Marriage and Student Loan Debt
11
Taxpayer Advocate Service. What to Know about Student Loan Forgiveness and Your Taxes
12
Office of the Law Revision Counsel. 26 USC 108 – Income From Discharge of Indebtedness
13
Internal Revenue Service. What if I Am Insolvent?
14
Federal Student Aid. What Repayment Plans Qualify for Public Service Loan Forgiveness (PSLF)?
15
Federal Student Aid. Income-Driven Repayment (IDR) Plan
16
Consumer Financial Protection Bureau. Trying to Enroll in an Income-Driven Repayment Plan? Avoid #ApplicationAbyss With Our Student Loan Tips and Resources