What are income-driven repayment plans?

Income-driven repayment (IDR) plans set your federal student loan payment from your income instead of your balance, and forgive what is left after 20 to 30 years of qualifying payments. From July 2026 the main plan is the Repayment Assistance Plan (RAP). Income-Based Repayment (IBR) remains for loans made before July 1, 2026, and PAYE and ICR stay open to those borrowers until July 1, 2028. They apply only to federal loans.

Which income-driven repayment plan has the lowest payment?

It depends on income and family size. RAP charges 1% to 10% of your whole adjusted gross income, minus $50 a month per dependent, with a $10 minimum. IBR charges 10% (15% for pre-July 2014 borrowers) of income above 150% of the poverty line. For a single borrower with no dependents on the post-2014 version of IBR, IBR is usually cheaper below about $35,000 and above about $70,000 of income, and RAP is cheaper in between. Each dependent lowers the RAP payment by $50 a month. SAVE, which had the lowest payments, has ended.

What happened to the SAVE plan?

The Education Department settled the lawsuit against SAVE in December 2025 and a court entered the judgment in March 2026. No one can enroll in SAVE, and borrowers who were in it are being moved out: servicers began sending notices in July 2026 giving about 90 days to pick a new plan, after which borrowers who do not choose are placed in a standard plan.

Do income-driven repayment plans qualify for PSLF?

Yes. On-time payments under RAP, IBR, PAYE and ICR all count toward the 120 payments needed for Public Service Loan Forgiveness, as do payments under the 10-year standard plan. You must also work full-time for a qualifying public service employer.

What happens to unpaid interest on income-driven repayment?

On RAP, interest that your on-time payment does not cover is not charged, and if your payment reduces principal by less than $50 in a month, the government makes up the difference, so your balance goes down every month you pay. On IBR, the government covers unpaid interest on subsidized loans for the first three years only, so balances can grow.

Income-Driven Repayment Plans 2026: RAP, IBR and the End of SAVE

Income-driven repayment (IDR) plans set your federal student loan payment from what you earn, not what you owe. The rules changed in 2026: a new Repayment Assistance Plan (RAP) launched on July 1, 2026, the SAVE plan has ended, and PAYE and ICR close on July 1, 2028. Which plans you can use now depends on when your loans were made.

Which Plans Can You Use?

Your loans	Income-driven options	Other option
All made before July 1, 2026	RAP, IBR, and until July 1, 2028, PAYE and ICR	Existing standard, graduated and extended plans
Any loan made on or after July 1, 2026 (this then applies to all your Direct Loans, including older ones)	RAP only	Standard plan of 10–25 years based on balance
Parent PLUS loans made on or after July 1, 2026	None	Standard plan only

Under the new standard plan, the repayment term depends on your total federal balance when you enter repayment: under $25,000 is 10 years, $25,000 to $49,999 is 15 years, $50,000 to $99,999 is 20 years, and $100,000 or more is 25 years.

IDR Plan Comparison at a Glance

Plan	Payment	Forgiveness	Status (2026)
RAP	1%–10% of AGI, minus $50/month per dependent ($10 minimum)	After 360 qualifying payments (30 years)	Open since July 1, 2026
IBR (new borrowers)	10% of income above 150% of poverty line	20 years	Open for loans made before July 1, 2026
IBR (older borrowers)	15% of income above 150% of poverty line	25 years	Open for loans made before July 1, 2026
PAYE	10% of income above 150% of poverty line	20 years	Open to eligible borrowers until July 1, 2028
ICR	20% of income above 100% of poverty line (or a 12-year fixed amount if lower)	25 years	Open until July 1, 2028
SAVE	—	—	Ended; borrowers are being moved to other plans

How Each Plan Works

RAP (Repayment Assistance Plan)

Created by the 2025 budget law (Public Law 119-21) and available since July 1, 2026. Unlike the older plans, RAP does not subtract a poverty-line allowance; it takes a percentage of your whole adjusted gross income, and the percentage rises with income:

Adjusted gross income	Yearly payment
$10,000 or less	$120 ($10/month)
$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
Over $100,000	10% of AGI

Key features:

The monthly amount is reduced by $50 for each dependent, with a $10 minimum payment
Interest your on-time payment doesn’t cover is not charged
If an on-time payment reduces principal by less than $50, the government reduces your principal by the difference (up to $50)
Any balance left after 360 qualifying payments is forgiven
Parent PLUS loans (and consolidation loans that repaid them) are not eligible

IBR (Income-Based Repayment)

Available for loans made before July 1, 2026. The 2025 law removed the old “partial financial hardship” test, so any borrower with eligible loans can enroll; your payment is capped at what you would pay on a 10-year standard plan.

	IBR New	IBR Old
First loan date	On/after 7/1/2014	Before 7/1/2014
Payment	10% of discretionary income	15% of discretionary income
Forgiveness	20 years	25 years
Interest subsidy	Unpaid interest on subsidized loans covered for 3 years	Same

PAYE (Pay As You Earn)

10% of discretionary income with forgiveness after 20 years, for borrowers who were new borrowers on or after October 1, 2007 and received a disbursement on or after October 1, 2011. It remains open until July 1, 2028; borrowers still on it by then must move to RAP or IBR.

ICR (Income-Contingent Repayment)

Payment is the lesser of 20% of income above the poverty line, or a fixed 12-year payment adjusted for income, with forgiveness after 25 years. ICR is the only income-driven plan open to consolidated Parent PLUS loans. It ends on July 1, 2028; Parent PLUS borrowers who are on ICR before then can move to IBR.

SAVE (ended)

SAVE was launched in 2023 and blocked by federal courts in 2024. The Education Department agreed in December 2025 to end it, and a court entered the judgment in March 2026. Borrowers who were in SAVE spent months in forbearance; from July 2026 servicers began moving them into repayment, with about 90 days to choose a new plan before being placed in a standard plan.

Monthly Payment Examples by Income

Assumptions: single borrower, no dependents, 48 contiguous states. Discretionary income for IBR uses 150% of the 2026 HHS poverty guideline ($15,960 × 1.5 = $23,940).

$40,000 AGI

Plan	How it’s calculated	Monthly Payment
RAP	3% × $40,000	$100
IBR New	10% × ($40,000 − $23,940)	$134
IBR Old	15% × ($40,000 − $23,940)	$201
ICR	20% × ($40,000 − $15,960)	$401

$65,000 AGI

Plan	How it’s calculated	Monthly Payment
RAP	6% × $65,000	$325
IBR New	10% × ($65,000 − $23,940)	$342
IBR Old	15% × ($65,000 − $23,940)	$513
ICR	20% × ($65,000 − $15,960)	$817

$90,000 AGI

Plan	How it’s calculated	Monthly Payment
RAP	8% × $90,000	$600
IBR New	10% × ($90,000 − $23,940)	$551
IBR Old	15% × ($90,000 − $23,940)	$826

With one dependent, each RAP payment above is $50 lower; IBR would use the higher poverty line for a two-person household. IBR and PAYE payments are capped at the standard 10-year amount; ICR payments are not. Use the Loan Simulator at studentaid.gov for your own figures.

Which IDR Plan Should You Choose?

Your Situation	Likely Best Plan
Any loan made on or after July 1, 2026	RAP (the only income-driven option)
Pursuing PSLF with pre-July 2026 loans	Whichever of RAP or IBR gives the lower payment — less paid before forgiveness
Pre-July 2026 loans, single, no dependents	IBR New is usually lower below about $35,000 and above about $70,000 of income; RAP is lower in between
Pre-July 2026 loans, with dependents	RAP is often lower because of the $50/month per-dependent reduction
Balance far above income, not pursuing PSLF	IBR New forgives after 20 years; RAP after 30
Parent PLUS loans (consolidated)	ICR until July 2028, then IBR if you moved before then

Annual Recertification

IDR plans require annual income recertification. The 2025 law directs the Education Department to recertify automatically using IRS data for borrowers who consent. If you have to recertify yourself and miss the deadline:

Payments revert to the standard 10-year amount (which can be much higher)
Unpaid interest may capitalize
Set a calendar reminder 60–90 days before your deadline

Recertify at StudentAid.gov even if your income hasn’t changed.

IDR Forgiveness and Taxes

Forgiveness under RAP, IBR, PAYE and ICR is taxable income at the federal level. The temporary exclusion for student loan forgiveness ended after 2025; from 2026 only discharges for death or total and permanent disability are excluded. State tax treatment varies.

Exception: PSLF forgiveness (after 120 qualifying payments) is tax-free.

Planning tip: If you’ll receive IDR forgiveness in 20+ years, work with a tax professional as the forgiveness date approaches to plan for the tax bill.

How to Enroll

Log in to StudentAid.gov with your FSA ID
Go to “Repayment Plans” → “Apply for Income-Driven Repayment”
Choose your plan (or let the system recommend the lowest-payment option)
Consent to share your tax information with the Education Department, or upload income documentation
Confirm family size
Servicer processes in 2–4 weeks; payments adjust on next billing cycle

Written by WealthVieu

WealthVieu researches and writes data-driven personal finance guides using primary sources including the IRS, Bureau of Labor Statistics, Federal Reserve, and Census Bureau.

The content on Wealthvieu is for informational purposes only and should not be considered financial, tax, or investment advice. Consult a qualified professional before making financial decisions. Full disclaimer · Editorial policy