Quick Answer
Income-driven repayment plans cap monthly student loan payments at 5–15% of discretionary income. The SAVE plan (2024+) offers the lowest payments at 5% for undergrad loans. After 20–25 years of payments, remaining balances are forgiven. Public service workers qualify for tax-free forgiveness after just 10 years under PSLF.
Key Takeaways
- The SAVE plan caps payments at 5% of discretionary income for undergrad loans — the lowest of any IDR plan.
- Discretionary income = AGI minus 225% of the federal poverty line ($35,910 for a single person in 2026 per HHS).
- Forgiveness after 20 years (undergrad) or 25 years (grad), with forgiven amounts potentially taxable.
- PSLF forgiveness after 10 years is tax-free — the best deal for qualifying public service workers.
Tahir Özcan
Founder & Lead AuthorPersonal-finance researcher & software engineer · WealthCalc · Est. 2025
Tahir built WealthCalc after a decade of modeling household budgets, retirement plans, and mortgage amortization schedules for family and friends. He translates dense regulatory language — IRS Revenue Procedures, SSA COLA announcements, FHFA conforming loan limits — into accurate, usable calculator logic. Every formula is hand-audited against the primary government release and cross-validated with CFA Institute curriculum standards. Read our editorial standards →
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If your student loan payments are unmanageable relative to your income, income-driven repayment (IDR) plans can dramatically reduce your monthly obligation. In 2026, four IDR plans are available, each with different payment formulas and forgiveness timelines. Choosing the right one can save you tens of thousands of dollars.
2026 IDR Plan Comparison
Here is how the four plans stack up:
- SAVE (Saving on a Valuable Education): 5% of discretionary income for undergrad, 10% for grad. Forgiveness: 20 years (undergrad) or 25 years (grad). No interest capitalization. Newest and most generous plan.
- PAYE (Pay As You Earn): 10% of discretionary income. Forgiveness: 20 years. Capped at standard 10-year payment amount. Only for borrowers who took loans after Oct 2007.
- IBR (Income-Based Repayment): 10% or 15% of discretionary income depending on when you borrowed. Forgiveness: 20 or 25 years.
- ICR (Income-Contingent Repayment): 20% of discretionary income or fixed 12-year payment adjusted for income. Forgiveness: 25 years. Least generous — mainly used for Parent PLUS consolidation.
How Payments Are Calculated
All IDR plans use the same base formula with different percentages:
Monthly payment = (AGI − 225% of poverty line) × plan percentage ÷ 12
For a single borrower earning $55,000 in 2026: ($55,000 − $35,910) × 5% ÷ 12 ≈ $80/month. Compare that to the standard 10-year payment on $35,000 at 6.53%: $398/month.
- Income under 225% of poverty line: $0 monthly payment (and $0 payments count toward forgiveness)
- Married filing jointly: Both spouses' income is included in the calculation
- Married filing separately: Only your income counts — useful if your spouse earns much more
- Annual recertification: You must recertify income and family size each year
The Forgiveness Payoff
After making qualifying payments for 20–25 years, the remaining balance is forgiven. Important details:
- IDR forgiveness is currently tax-free through 2028 under the OBBBA extension — after 2028, forgiveness may become taxable income again unless Congress acts
- PSLF forgiveness is always tax-free — a major advantage for government and nonprofit workers
- $0 payments count: If your income is low enough for $0 payments, those months still count toward forgiveness
- Forgiveness timeline resets if you consolidate loans (but prior IDR payments may be counted under certain adjustment programs)
Choosing the Right IDR Plan
Use this decision framework:
- Undergrad loans only → SAVE plan: Lowest payments (5%) and shortest forgiveness (20 years)
- Grad school loans → Compare SAVE vs PAYE: SAVE charges 10% but has interest benefits; PAYE caps at standard payment
- Work in public service → Any IDR + PSLF: Get tax-free forgiveness after just 10 years
- Parent PLUS loans → ICR after consolidation: The only IDR plan available for Parent PLUS
- High income, low balance → Standard repayment: IDR may cost more in total interest if your income grows significantly
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Frequently Asked Questions
Can I switch between IDR plans?
Yes, you can switch IDR plans at any time by submitting a new application to your loan servicer. Prior qualifying payments generally count toward forgiveness on the new plan. However, if you consolidate loans during the switch, be aware that this can reset certain forgiveness clocks.
What if I cannot afford even the IDR payment?
If your income is below 225% of the federal poverty line ($35,910 for a single person in 2026 per HHS), your IDR payment is $0. These zero-dollar payments still count toward the 20/25-year forgiveness timeline and toward PSLF. You must still recertify annually to maintain the $0 payment.
Do IDR plans affect my credit score?
No — enrolling in an IDR plan is not reported negatively. As long as you make your IDR payments on time, your credit score is unaffected. In fact, IDR can help your credit by preventing missed payments on unaffordable standard repayment amounts.
Primary Sources
Last reviewed:
All 2026 figures in this article are pulled from the official statutory releases linked below. We update them within 48 hours of a new IRS Revenue Procedure, SSA COLA announcement, or CMS/FHFA/HUD fact sheet.
- BLS — Consumer Price Index(published )
Figures are updated whenever the IRS, SSA, CMS, FHFA, HHS, or BLS publishes a new inflation adjustment or statutory change. This tool is for educational purposes only and does not constitute tax, legal, or investment advice. Consult a qualified professional for decisions affecting your personal finances.