Income-Driven Repayment (IDR): IBR, RAP, and PAYE Plans

Income-driven repayment plans cap your monthly federal student loan payment at a percentage of your income instead of the amount needed to clear the loan in ten years, and if your income is low enough the payment can drop to zero. Only Federal Direct Loans qualify, though Federal Family Education Loan (FFEL) borrowers can gain access by consolidating into a Direct Consolidation Loan.¹ The menu of plans changed sharply in 2026, so which one you should be on depends heavily on when you’re reading this.

What Changed in 2026

Three shifts reshaped IDR this year. On March 9, 2026, the U.S. Court of Appeals for the Eighth Circuit issued a final ruling vacating the Saving on a Valuable Education (SAVE) plan in its entirety. More than seven million borrowers who had been placed in forbearance during the litigation now have to pick a different plan, or their servicer will move them onto one.²

The One Big Beautiful Bill Act (OBBB) then created a new IDR option called the Repayment Assistance Plan (RAP), which takes effect no later than July 1, 2026. RAP uses a sliding-scale percentage of your adjusted gross income instead of the discretionary-income formula used by older plans.³ The same law scrapped the partial financial hardship test for Income-Based Repayment (IBR), so borrowers who previously earned too much to qualify can now enroll.⁴

Finally, the OBBB phases out SAVE, Pay As You Earn (PAYE), and Income-Contingent Repayment (ICR) as of July 1, 2028. After that date, only IBR and RAP will remain.

Income-Based Repayment

IBR is the longest-running IDR plan still open to new enrollees and is now the primary income-driven option for most borrowers. It comes in two versions depending on when you first took out federal loans.

Loans first borrowed before July 1, 2014: you pay 15% of discretionary income, with any remaining balance forgiven after 25 years.
Loans first borrowed on or after July 1, 2014: you pay 10% of discretionary income, with forgiveness after 20 years.¹

IBR guarantees your monthly payment will never exceed what you would owe under the standard 10-year plan. That cap is fixed when you first enroll. If your income rises enough that the formula produces a higher number, you still pay only the capped amount, and if your income later drops the payment recalculates downward at recertification.¹

Before the OBBB, you had to show a “partial financial hardship” to get in. That requirement is gone. Borrowers with loans made on or after July 1, 2014, and before July 1, 2026, who previously earned too much can now enroll at the 10% rate with a 20-year forgiveness term.⁴

How Your IBR Payment Is Calculated

IBR uses “discretionary income,” which is not your take-home pay. Subtract 150% of the Federal Poverty Guideline (FPG) for your family size from your adjusted gross income (AGI). The FPG for a single person in the 48 contiguous states is $15,960 in 2026, so 150% is $23,940.⁵

Here’s the math for a single borrower earning $50,000 under the 10% tier. Subtract $23,940 from $50,000 to get $26,060 in discretionary income. Multiply by 10% to get $2,606 per year, then divide by 12. The monthly payment lands around $217. Under the older 15% tier, the same borrower would pay about $326 a month. Family size matters: a family of four has a 2026 FPG of $33,000, so 150% is $49,500, leaving far less discretionary income in the formula.⁵

The Repayment Assistance Plan

RAP is the newest IDR option, taking effect no later than July 1, 2026. It works differently from every previous income-driven plan. Instead of subtracting a poverty-guideline threshold to get discretionary income, RAP applies a sliding-scale percentage to your total AGI.³

The percentage climbs in $10,000 AGI brackets:

$10,000 or less: $10 per month (flat)
$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
Above $100,000: 10% of AGI (capped)³

Divide the annual figure by 12 for the monthly payment, then reduce it by $50 for each dependent you claim on your tax return. RAP does not distinguish between undergraduate and graduate debt for payment purposes, and subsidized, unsubsidized, Graduate PLUS, and consolidation loans are all eligible.³

RAP includes two built-in subsidies. If your calculated payment doesn’t cover the interest accruing that month, the remaining interest is waived rather than added to your balance. If your payment doesn’t reduce principal by at least $50, a subsidy makes up the difference so the balance falls by at least $50 each month. Forgiveness under RAP arrives at 30 years, longer than the 20- or 25-year terms under IBR. Payments made under RAP count toward Public Service Loan Forgiveness.⁴

PAYE and ICR for Current Enrollees

If you’re already on PAYE or ICR, you can keep paying under those plans until they are formally terminated on July 1, 2028. New enrollment may be limited during the transition.

PAYE caps payments at 10% of discretionary income (using the same 150% FPG threshold as IBR) and forgives any remaining balance after 20 years. Your payment can never exceed the 10-year standard amount. To have originally qualified, you needed no outstanding federal loan balance as of October 1, 2007, and a Direct Loan disbursement on or after October 1, 2011.¹

ICR is the oldest income-driven plan and generally produces the highest payments. It sets your monthly payment at 20% of discretionary income or the amount you’d pay on a fixed 12-year schedule, whichever is lower. ICR uses only 100% of the FPG, not 150%, so less of your income is protected. Forgiveness comes at 25 years.⁶

Parent PLUS Loans and the June 2026 Deadline

Parent PLUS loans have always been the awkward outlier. A Parent PLUS loan can’t enroll in IDR directly; you must first consolidate it into a Direct Consolidation Loan. Historically that consolidation loan could only reach ICR, the most expensive IDR plan. The OBBB opened IBR to Parent PLUS consolidation loans as well.⁴

The deadline is hard. Your Direct Consolidation Loan must be disbursed by June 30, 2026, to remain eligible for income-driven repayment. Any Parent PLUS consolidation completed after that date will be permanently barred from all IDR plans, including IBR and RAP, and those borrowers will be limited to the standard repayment plan. If you hold Parent PLUS loans and haven’t consolidated, start now; applications take several weeks. During the application, select ICR as your initial repayment plan and then switch to IBR once you’re enrolled. Borrowers already on ICR through a Parent PLUS consolidation have until July 1, 2028, to move into IBR.

How Marriage and Filing Status Affect Your Payment

Your tax filing status controls whether your spouse’s income enters the calculation. Under IBR, filing jointly means the servicer uses combined household income to calculate one payment and then splits it between you and your spouse based on each person’s share of the total federal loan balance. Filing separately means only your individual income counts.⁷

Under RAP, filing separately also excludes your spouse’s income. Your dependent count is limited to those on your individual return, though, which shrinks the per-dependent $50 reduction.

Filing separately to lower your loan payment carries real tax costs. You lose access to the student loan interest deduction, the earned income tax credit, and the childcare tax credit, and you face less favorable tax brackets. For some borrowers the loan savings outweigh the tax hit; others end up paying more overall. A tax professional can run both scenarios with your actual numbers.⁷

Applying and Recertifying

Applications go through StudentAid.gov. You’ll need your FSA ID, your most recent AGI from your federal tax return, and your spouse’s information if applicable. If your income has dropped significantly since your last tax filing, you can submit alternative documentation such as recent pay stubs or a letter from your employer. FFEL borrowers must consolidate into a Direct Consolidation Loan before applying.⁸⁹

Enrollment is not a one-time event. You must recertify your income and family size every year. If you consented to let the Department of Education access your federal tax information, your plan may be autorecertified without any action on your part. Otherwise you are responsible for submitting updated information by the deadline.⁸

Missing recertification hurts. Under IBR, any unpaid interest capitalizes, meaning it gets added to your principal balance and you start paying interest on the larger amount. Your monthly payment jumps to the 10-year standard amount based on what you owed when you first entered IBR. You can return to income-based payments by submitting updated income, but the capitalized interest does not reverse.¹

If your income drops before your recertification date, don’t wait. You can recertify early at any time through the online application to get a lower payment sooner.

Forgiveness Timelines

Every IDR plan forgives any remaining balance after a set number of qualifying payments:

IBR (pre-July 2014 borrowers): 25 years
IBR (post-July 2014 borrowers): 20 years¹
PAYE: 20 years
ICR: 25 years⁶
RAP: 30 years

Months where your calculated payment is $0 still count toward forgiveness as long as you stay enrolled. Forgiveness covers both remaining principal and any accrued interest.

Public Service Loan Forgiveness

PSLF offers a much faster route: 120 qualifying monthly payments, or ten years, instead of 20 to 30. You must work full-time for a government organization at any level or a qualifying nonprofit, and you must be repaying Direct Loans under an IDR plan or another qualifying plan. Full-time means at least 30 hours per week on average, and you can combine hours across qualifying employers to meet that threshold. The 120 payments don’t have to be consecutive.¹⁰ Payments made under RAP count toward PSLF, which makes RAP workable for public-service workers building toward the ten-year mark.⁴

Taxes on Forgiven Balances

This is where many borrowers get an unpleasant surprise. When your remaining balance is forgiven at the end of an IDR term, the IRS treats the forgiven amount as taxable ordinary income. If $80,000 is forgiven after 25 years of IBR payments, your taxable income for that year rises by $80,000, which could produce a tax bill of $10,000 or more depending on your bracket.

The American Rescue Plan Act temporarily suspended this treatment for student loan forgiveness occurring between December 31, 2020, and January 1, 2026. That exemption has now expired, and any IDR forgiveness granted on or after January 1, 2026, is again taxable at the federal level.¹¹

PSLF is the exception. The full balance forgiven under PSLF is excluded from gross income under federal tax law and always has been, which makes PSLF significantly more valuable dollar-for-dollar than standard IDR forgiveness for borrowers who qualify.¹¹ State tax treatment varies, so borrowers approaching forgiveness should factor in both federal and state exposure.

If You Were on the SAVE Plan

If you enrolled in or applied for SAVE before it was struck down, your loans were likely placed in administrative forbearance during the litigation. You now have to select a new repayment plan; if you don’t, your servicer will move you to one.²

Time spent in certain forbearances, including the SAVE-related forbearance, can count as progress toward loan forgiveness under provisions from the July 2023 IDR rule. The practical move is to log in to StudentAid.gov, review your options, and either enroll in IBR or wait for RAP to open. Letting the servicer decide for you risks landing on the standard repayment plan with a higher monthly payment and no path to forgiveness short of paying the full balance.²

1
Federal Student Aid. Income-Driven Repayment Plans
2
Federal Student Aid. IDR Plan Court Actions – Impact on Borrowers
3
Congressional Research Service. The Repayment Assistance Plan (RAP) in PL 119-21, the FY2025 Budget Reconciliation
4
Federal Student Aid Partners. GEN-25-04 Federal Student Loan Program Provisions Effective Upon Enactment Under One Big Beautiful Bill Act
5
HHS ASPE. 2026 Poverty Guidelines
6
Edfinancial Services. Edfinancial Services – Income-Contingent Repayment (ICR)
7
Federal Student Aid. 4 Things to Know About Marriage and Student Loan Debt
8
Federal Student Aid. Income-Driven Repayment (IDR) Plan Application
9
Federal Student Aid. What to Know About Federal Family Education Loan FFEL Program Loans
10
Federal Student Aid. Public Service Loan Forgiveness FAQs
11
Office of the Law Revision Counsel. 26 USC 108 – Income From Discharge of Indebtedness