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How the IDR Plans Work

All of the income-driven repayment plans are very similar in how they work. For this module, we will just give a high-level overview of them all.

  • Your payment will be calculated based on either 10% or 15% of your discretionary income minus an allowance for family size
  • Discretionary income is defined as your Adjusted Gross Income – 150% of poverty guideline for your family size
  • That result is divided by 12
  • If amount is less than the poverty level your payment is $0 per month
  • Zero-dollar payments DO count for PSLF if under an IDR plan
  • Your spouse’s income may be taken into account depending on the plan you are under and your tax filing status
  • IDR plans also forgive the balance of your loans but only after 20 or 25 years depending on the plan you are on
  • The forgiven amount under an IDR is taxed as income.
  • The amount forgiven under PSLF is not taxed
  • Income-Contingent Repayment
    • This is the best option for Parent PLUS loans as they are ineligible for the other income driven repayment plans.
    • To access ICR, you must consolidate at StudentAid.gov.
  • ICR payments are calculated as:
    • 20 percent of your discretionary income or
    • what you would pay on a repayment plan with a fixed payment over the course of 12 years, adjusted according to your income
  • The best way to determine your ICR payment is to use the loan simulator at StudentAid.gov/loan-simulator/
  • If you need more information about the income-driven plans, you can check out the repayment section at freestudentloanadvice.org.