My FICO logo $$$$$$$$$$$ 9876 5432 1234 5678 CREDIT CARD KELLY SMITH 11/26 My FICO logo
SCORE
Skip Navigation
  • Why FICO
  • How It Works
  • Pricing
  • Education
  • Community
  • Support
  • Member Dashboard
  • Log In Log Out
  • Start Plan
 
  • Why FICO
  • How It Works
  • Pricing
  •  
  • Education
    • Credit Education
    • Credit Scores
    • What Is a FICO Score?
    • FICO Scores vs Credit Scores
    • FICO Scores Versions
    • New FICO Scores
    • How Scores Are Calculated
    • Payment History
    • Amount of Debt
    • Length of Credit History
    • Credit Mix
    • New Credit
    • How to Improve Your Score
    • How to Build Credit
    • Credit Reports
    • What's in Your Report
    • Credit Bureaus
    • Inquiries
    • Errors on Your Report?
    • Blog
    • Calculators
    • Loan Savings
    • Vehicle Payments
    • How Much Can I Borrow?
    • Should I Consolidate My Credit Cards?
    • Know Your Rights
    • Identity Theft
    • FAQ
    • Glossary
  • Community
  • Support
  • Member Dashboard
  • Log In Log Out
  • Our Products
    • Ongoing Credit Monitoring Track your FICO® Score & identity
    • One-time Credit Reports Be prepared for important transactions
  • How Can We Help
    • Monitor Credit & Identity
    • Mortgages
    • Credit Cards
    • Auto Loans
  • Credit Education
  • Community
  • Support
  • Our Products
    • Ongoing Credit Monitoring Track your FICO® Score & identity
    • One-time Credit Reports Be prepared for important transactions
  • Credit Education
  • Credit Scores
    • What Is a FICO Score?
    • FICO Scores vs Credit Scores
    • FICO Score Versions
    • New FICO Scores
    • How Scores Are Calculated
    • Payment History
    • Amount of Debt
    • Length of Credit History
    • Credit Mix
    • New Credit
    • How to Improve Your Score
    • How to Build Credit
  • Credit Reports
    • What's in Your Report
    • Credit Bureaus
    • Inquiries
    • Errors on Your Report?
  • Blog
  • Calculators
    • Loan Savings
    • Vehicle Payments
    • How Much Can I Borrow?
    • Should I Consolidate My Credit Cards?
  • Know Your Rights
  • Identity Theft
  • FAQ
  • Glossary
View all Financing & Loans articles

IDR (Income Driven Repayment) - lessening the stress of federal student loan repayment.

September 15, 2016, by Rob Kaufman

Paying back student loans is a stressful experience, especially for a recent graduate who is either unemployed or making a low salary. That's where IDR (Income Driven Repayment) plans come in. These plans were developed to help borrowers (students, not parents) keep loan payments affordable and manageable, lowering the stress that typically comes with repayment.

Different plans for different people

There have been various IDR plans set up that are available based on an individual's situation and what type of repayment plan might work best for him or her. Although they may be different, they all have one thing in common: they place caps on payments based on income and family size. Some even allow debt to be forgiven if the loan hasn't been paid in full after 20 or 25 years of payment.

  • Income-Based Repayment (IBR): For loans taken out after 7/1/14, payments are equal to 15 percent of discretionary income, with loan forgiveness after 25 years or 10 percent of discretionary income with loan forgiveness after 20 years. This plan never requires more than the 10-year standard repayment plan monthly payment amount.

  • Pay As You Earn (PAYE): For first loans taken out after 9/30/2007 and at least one loan after 9/30/2011, payments are equal to ____ 10 percent of your discretionary income with loan forgiveness after 20 years of payments. This plan never requires more than the 10-year standard repayment plan monthly payment amount.

  • Revised Pay As You Earn Repayment (REPAYE): This program is open to more borrowers and like PAYE, your monthly payments are 10 percent of your discretionary income. NOTE: if you have graduate school debt, it will take 25 years of payments to qualify for loan forgiveness.

  • Income-Contingent Repayment (ICR): Payments are the lesser of either: 20% of discretionary income or the amount of what the payments would be for 12-year repayment times the income percentage factor. You can receive loan forgiveness after 25 years of payments.

IDR Plan PROs and CONs

Most of life's decisions consist of an upside and a downside. Loan repayment options are no different. Let's start with the positive side of IDRs...

  • Lower monthly payments : With the IBR and PAYE plans, monthly payments must be lower than if you were utilizing the 10-year standard repayment plan. This should help make your payments more affordable so that you'll have more money to use for other monthly expenses.

  • Loan discharge: If you have a loan balance remaining after the 20 or 25 year repayment period (plan-dependent), the balance will be forgiven.

  • Public Service Loan Forgiveness program : When you repay your loans through an IDR plan, you may be eligible (depending on your field of career) for your loan balance to be forgiven after 10 years of timely payments through the Public Service Loan Forgiveness (PSLF) program. Additionally, this forgiven balance will be tax-free.

  • No fixed payments: IDRs, you are not locked-in to fixed monthly payments because they change as your income changes. This helps to keep your monthly payments manageable for the length of your loan. It should be noted that if your income drops to zero, your payment will be adjusted accordingly and still count as an on-time payment.

So those are the positive aspects of IDR plans. Now onto the "not-so-positive" aspects...

  • More interest paid: With IDR plans, your smaller payments over a longer period of time (compared to the 10-year standard repayment plan), means you'll be paying an overall greater amount of interest.

  • Longer loan term: IDR plans extend your loan term to 20 or 25 years. If your income increases by a large amount and your monthly payments are higher, you may pay off your loan before you qualify for loan forgiveness.

  • Taxes on forgiven debt: Unlike the forgiven balance on the PSLF mentioned above, the forgiven balance on the IDR plans may be taxable as income.

  • Income information requirements : Annual updates about your income and family size are required in order to continue to qualify for IDR loans. If you forget to provide this information or miss the deadline for providing it, you will be let go from your current plan and placed on the 10-year standard repayment plan.

  • Loan qualification : IDR plans are available only for federal student loans, and currently not every federal student loan qualifies.

If interested in applying for an IDR, you can do so online. The four things you'll need are:

  1. Federal Student Aid ID

  2. Personal Information (i.e. Name, Address, Phone, etc.)

  3. Spouse Information (if applicable)

  4. Income Information

Want more advice for paying off and understanding student loans? Check out the student loan information page at the myFICO Forums.

Rob Kaufman

Rob is a writer... of blogs, books and business. His financial investment experience combined with a long background in marketing credit protection services provides a source of information that helps fill the gaps on one's journey toward financial well-being. His goal is simple: The more people he can help, the better.

Estimate your FICO Score range

Answer 10 easy questions to get a free estimate of your FICO Score range

740 - 790
Estimate for Free

Instant Access to Your FICO® Score

90% of Top Lenders Use FICO® Scores. Do you know yours?

Get Access Now!

Page footer

Products

  • Home
  • Why FICO
  • How It Works
  • Pricing

Learn

  • Education
  • Community
  • Support
  • Blog

Company

  • About Us
  • Terms of Use
  • Privacy Policy
  • Affiliate Program
  • Accessibility

Get Our App

  • Download iOS app on the App Store
  • fil_get
    Get Android app on the Google Play Store

Follow Us

  • Twitter
  • Facebook
  • Instagram

Credit Education

  • Credit scores
  • What is a FICO Score?
  • FICO Score versions
  • How scores are calculated
  • Payment history
  • Amount of debt
  • Length of credit history
  • Credit mix
  • New credit
  • Credit reports
  • What's in your report
  • Bureaus
  • Inquiries
  • Errors on your report?
  • Calculators
  • Know your rights
  • Identity theft
  • FAQ
  • Glossary

Copyright ©2001- Fair Isaac Corporation. All rights reserved.

IMPORTANT INFORMATION:

All FICO® Score products made available on myFICO.com include a FICO® Score 8, and may include additional FICO® Score versions. Your lender or insurer may use a different FICO® Score than the versions you receive from myFICO, or another type of credit score altogether. Learn more

FICO, myFICO, Score Watch, The score lenders use, and The Score That Matters are trademarks or registered trademarks of Fair Isaac Corporation. Equifax Credit Report is a trademark of Equifax, Inc. and its affiliated companies. Many factors affect your FICO Scores and the interest rates you may receive. Fair Isaac is not a credit repair organization as defined under federal or state law, including the Credit Repair Organizations Act. Fair Isaac does not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit record, credit history or credit rating. FTC's website on credit.

PRIVACY NOTICE: When you visit this website we collect your browsing activities on our site and use that information to analyze and research improvements to the website, and to our products and services. When you register for our products and services, we also collect certain personal information from you for identification purposes, such as your name, address, email address, telephone number, social security number, IP address, and date of birth. Further information is available in our FICO Data Privacy Policy. For visitors with visual disabilities, access to this website, including our FICO Data Privacy Policy, is available through assistive technologies, such as BrowseAloud, JAWS, VoiceOver, Narrator, ChromeVox, and Window-Eyes. More details on software and accessibility are available at WebAIM.org.