Income-Driven Repayment Plans Explained: PAYE vs SAVE vs IBR vs ICR
Income-driven repayment (IDR) plans cap your federal student-loan payment at a percentage of your discretionary income, with the unpaid balance forgiven after 20 or 25 years. There are four of them, and the differences matter — picking the wrong plan can cost you tens of thousands over a typical loan. Here's how each one works, who it's for, and how they compare on a real $80,000 federal balance.
Important: The SAVE plan has been the subject of ongoing federal litigation since 2024, with court orders pausing portions of it and the Department of Education periodically updating guidance. The structural numbers below reflect the rule as written; confirm current SAVE availability and any administrative forbearance status at studentaid.gov before enrolling.
The IDR formula in one paragraph
All four IDR plans use the same skeleton: take your AGI (or AGI plus spouse's AGI if you file jointly), subtract a multiple of the federal poverty line (the “poverty exclusion”), then multiply by a percentage. The result, divided by 12, is your monthly payment. The percentages and poverty exclusions differ by plan, and that's where most of the variation in your monthly bill comes from.
Plan-by-plan summary
SAVE (Saving on a Valuable Education)
- Payment: 10% of discretionary income for grad loans; 5% for undergrad-only borrowers; weighted average for mixed portfolios. (Original rule; portions enjoined by litigation as of early 2026.)
- Discretionary income: AGI minus 225% of the federal poverty line for your household size.
- Forgiveness: 20 years for undergrad-only borrowers; 25 years if any loans are graduate; or as little as 10 years for borrowers with original balances under $12,000 — though the short-term forgiveness provisions are among the items affected by the 2024–2025 court orders.
- Interest subsidy: If your monthly payment doesn't cover the accruing interest, the government waives the rest — your balance stops growing while you're on plan. This is unique to SAVE.
- Best for: Lowest payment of any plan when available; the interest subsidy is structurally generous.
PAYE (Pay As You Earn)
- Payment: 10% of discretionary income, never more than the 10-year Standard payment.
- Discretionary income: AGI minus 150% of the federal poverty line.
- Forgiveness: 20 years.
- Eligibility: Must be a “new borrower” — no federal loans before October 1, 2007, and at least one disbursement after October 1, 2011. PAYE was closed to new enrollees in 2024 but reopened to certain borrowers in 2026 guidance.
- Best for: Borrowers who qualify and want a 10% cap that's administratively simpler than SAVE.
IBR (Income-Based Repayment)
- Payment: 10% of discretionary income for new borrowers (post-July 2014); 15% for old borrowers — capped at the 10-year Standard payment.
- Discretionary income: AGI minus 150% of the federal poverty line.
- Forgiveness: 20 years (new borrowers); 25 years (old borrowers).
- Eligibility: No new-borrower restriction. Must show a “partial financial hardship” (your IBR payment would be lower than your 10-year Standard payment) to enroll.
- Best for: Borrowers who don't qualify for PAYE or SAVE; older borrowers who need PSLF and need any IDR plan immediately.
ICR (Income-Contingent Repayment)
- Payment: The lesser of (a) 20% of discretionary income or (b) what you'd pay on a 12-year fixed plan adjusted for income.
- Discretionary income: AGI minus 100% of the federal poverty line — the stingiest exclusion of any IDR plan.
- Forgiveness: 25 years.
- Eligibility: Open to anyone with eligible federal loans, including Parent PLUS borrowers who have consolidated. ICR is the only IDR plan Parent PLUS borrowers can access (after consolidation).
- Best for: Parent PLUS borrowers who want forgiveness; almost no one else picks ICR voluntarily.
The numbers on a real $80,000 federal balance
Single borrower, no dependents, $65,000 AGI in 2026, $80,000 federal Direct Loan balance at 6.4% weighted rate, all undergrad loans, no PSLF. 2026 federal poverty line for one-person household: $15,650.
| Plan | Discretionary income | Monthly payment |
|---|---|---|
| SAVE (5% undergrad) | $65,000 - (225% × $15,650) = $29,788 | ~$124 |
| PAYE (10%) | $65,000 - (150% × $15,650) = $41,525 | ~$346 |
| IBR new (10%) | Same as PAYE | ~$346 |
| ICR (20%) | $65,000 - $15,650 = $49,350 | ~$823 |
| 10-yr Standard | n/a | ~$905 |
Same borrower, $130,000 graduate-school federal balance at 7.0%, AGI $95,000:
| Plan | Monthly payment | 20–25 yr total paid |
|---|---|---|
| SAVE (10% grad) | ~$543 | ~$155,000 (with subsidy) |
| PAYE/IBR-new (10%) | ~$596 | ~$182,000 |
| ICR (20%) | ~$1,328 | Loan paid off well before forgiveness |
The interest-subsidy story (when SAVE is available)
Under SAVE's original interest rule, if your scheduled IDR payment doesn't cover the interest accruing each month, the government waives the rest. On a $130,000 grad balance at 7.0% with a $543 SAVE payment, monthly interest accrual is roughly $758; SAVE waives the $215 difference. Over 25 years that's a meaningful subsidy, and crucially your balance doesn't balloon while you're on plan. PAYE, IBR, and ICR let unpaid interest capitalize, which is how borrowers end up watching their loans grow despite making every payment.
How “new borrower” rules can lock you out
PAYE was historically restricted to borrowers with no federal loans outstanding before October 1, 2007. The Biden-era SAVE rules loosened access to IDR generally, but as the regulatory landscape keeps shifting, the practical answer is to check your eligibility on studentaid.gov rather than rely on years-old guides. If you took out a federal loan in 1999 and never paid it off, you may be locked out of PAYE permanently — IBR or ICR are your fallbacks.
Decision flowchart
- Pursuing PSLF? Pick the IDR plan that gives the lowest payment you qualify for, since the unpaid balance is forgiven at year 10. SAVE is usually the answer when available; PAYE or IBR-new otherwise.
- Not pursuing PSLF, undergrad-only, low income? SAVE's 5% rate and 20-year forgiveness can leave a meaningful balance for IDR forgiveness. PAYE is the next-best option.
- High income, want lowest lifetime cost? The 10-year Standard or aggressive prepayment usually wins. IDR is for cash-flow protection, not for minimizing total interest paid at high incomes.
- Parent PLUS borrower? Consolidate, then enroll in ICR. It's the only IDR plan you can use.
- Married, both with student loans? Run your taxes both ways. Filing separately can dramatically reduce IDR payments even if it raises your tax bill.
Recertification — don't miss the date
Every IDR plan requires annual income recertification. Miss the deadline and your servicer reverts you to the 10-year Standard plan on the higher of your old balance or current balance, capitalizing any unpaid interest. The new monthly payment can easily be 2-4× your old IDR amount overnight. Set a calendar reminder for 60 days before your recertification anniversary and submit through studentaid.gov.
Run your own numbers
Use the IDR comparator to plug in your real AGI, family size, and balances and see your monthly payment under each plan side by side. If you're trying to decide between IDR and refinancing into a private lender, read our refinance walkthrough first — federal-to-private is a one-way door that ends IDR eligibility forever. And if you're aiming for forgiveness via public-service work, the PSLF guide explains how IDR and PSLF interact.
Educational only. Not financial advice. IDR rules change often; confirm current plan availability and parameters at studentaid.gov before enrolling.