If you’re like many college graduates, you got a degree to improve your life. However, some graduates are finding that handling college debt is harder than they thought. If you qualify for income-based repayment, student loans may get easier to manage. What is income-based student loan repayment, and how does it work?
In this article, we’ll take a closer look at income-based repayment student loans and how to tell if they’re right for you.
Is Income-Driven Repayment Going Away for Student Loans?
You may have heard that income-driven repayment (IDR) plans are disappearing. While the One, Big, Beautiful Bill Act (OBBBA) made some big changes, IDR isn’t going away completely.
Income-driven repayment (IDR) is an umbrella term for income-dependent repayment plans. Income-based repayment (IBR) is one of four IDR plans. IBR is meant for people with a lot of debt compared to their income and family size.
What Options Are Available for Student Loan Repayment?
According to Federal Student Aid, there are a few types of IDR plans available as of March 2026:
- Income-Based Repayment (IBR)
- Income-Contingent Repayment (ICR)
- Pay As You Earn (PAYE)
The Saving on a Valuable Education (SAVE) plan was struck down in court, so SAVE borrowers will have to switch to another plan.
How Does Income-Based Repayment Forgiveness Work?
Income-based repayment (IBR) is one of several federal income-driven repayment plans that base your monthly payment on your income and family size.
Under IBR, your payment is typically capped at 10% or 15% of your discretionary income, depending on when you first took out your loans. That can help keep payments affordable during periods of lower income.
After 20 or 25 years of qualifying payments, any remaining balance may be forgiven.
Borrowers with older IBR plans are generally not required to switch to newer repayment options. If you are already enrolled in IBR, you can usually stay in that plan as long as you remain eligible. Newer plans, such as SAVE or PAYE, are separate options that some borrowers may choose if they offer lower payments or more favorable terms.
Your family size is also factored into the calculation because it affects your discretionary income, which can reduce your monthly payment.
Who Qualifies for Income-Based Repayment?
If an IBR plan sounds like a good fit, you may be wondering who qualifies and which loans are eligible.
Eligibility depends on your loan type and when you borrowed. In some older IBR plans, borrowers needed to show a “partial financial hardship,” meaning their standard 10-year repayment amount was higher than what they would pay under IBR. Newer versions of IBR do not include that requirement.
Eligible loans typically include Direct Subsidized and Unsubsidized Loans, as well as Direct Consolidation Loans that meet program rules. Some federal loans may need to be consolidated before they qualify.
Parent PLUS loans are not directly eligible for IBR. However, they may become eligible for certain income-driven repayment options if they are first consolidated into a Direct Consolidation Loan, depending on the repayment plan selected.
IBR is not a fast path to forgiveness. However, over time, it can significantly reduce monthly payments and may result in loan forgiveness after 20 or 25 years of qualifying payments.
How Do You Calculate Your Monthly Payment Under an Income-Based Plan?
Before you rush to enroll in an IDR plan, you probably want to know what your monthly payment would look like. Fortunately, figuring it out is pretty simple. Federal Student Aid has a loan simulator where you can enter your information and see your monthly payment for different types of loans.
Which Plan Should You Choose (IBR vs. PAYE vs. ICR)?
Not sure if income-based repayment is the best option for you? Student loans can be hard to manage, but choosing the right repayment plan helps. Let’s take a look at when you should choose Income-Based Repayment, Income-Contingent Repayment, or Pay As You Earn.
Income-Based Repayment (IBR)
Under current federal guidance, IBR is expected to be the only legacy income-driven repayment plan still available for most borrowers by July 1, 2028. PAYE and ICR enrollment both end on July 1, 2027, and borrowers in those plans must move to a different plan before July 1, 2028. IBR payments are generally 15% of discretionary income, or 10% for newer borrowers, and forgiveness happens after 25 years, or 20 years for newer borrowers.
Pay As You Earn (PAYE)
PAYE is similar to IBR, but it is only available to certain borrowers. To qualify, you must have been a new borrower on or after October 1, 2007, and received a Direct Loan disbursement on or after October 1, 2011. PAYE payments are generally 10% of discretionary income, and any remaining balance can be forgiven after 20 years. Enrollment in PAYE is available only until July 1, 2027, and borrowers in PAYE must switch to another plan before July 1, 2028.
Income-Contingent Repayment (ICR)
Income-Contingent Repayment (ICR) sets monthly payments as the lesser of 20% of your discretionary income or what you would pay on a 12-year fixed repayment plan adjusted for income. Any remaining balance may be forgiven after 25 years of qualifying payments.
Parent PLUS loans are not directly eligible for ICR. However, borrowers may gain access by consolidating their loans into a Direct Consolidation Loan.
ICR is also being phased out under recent federal student loan changes. New enrollment is expected to end in 2027, with a transition period in which existing borrowers will need to move into another eligible repayment plan by 2028.
Income-Based Repayment, Student Loans, and Your Future
It’s important to understand your options before deciding on an income-based repayment plan for student loans. By taking a proactive approach to income-based repayment of student loans, you could find yourself moving closer to financial freedom.
