Now that student loan payments have resumed, millions of borrowers are juggling their debt with their other expenses. For those who haven't had to make payments toward their loans in several years due to the federal payment freeze, it can be a difficult adjustment. According to the Consumer Financial Protection Bureau, about 20% of borrowers have risk factors indicating that they will financially struggle now that payments have begun.

If your payments are too high, one of the best ways to get relief is through an income-driven repayment (IDR) plan. For many borrowers, IDR plans slash their payments and, as an added benefit, provide a path toward IDR loan forgiveness.

What is income-driven repayment?

IDR plans are alternative payment plans for federal student loan borrowers. Instead of having a fixed monthly payment under a standard 10-year repayment plan, IDR plans base your monthly payments on your discretionary income — the difference between your income and a percentage of the federal poverty guideline.

Some enrollees will qualify for payments as low as $0, meaning they don't have to make any payment each month and will not enter default.

IDR plans typically have longer repayment terms; depending on your loan balance and the type of loans you have, you could be in repayment for 20 to 25 years. If you reach the end of the new repayment term and still have a balance, the government will forgive the remainder of your debt.

Important: Under the American Rescue Plan, all forms of loan forgiveness are tax-free through 2025. But loans forgiven under an IDR plan are typically taxable as income.

The four income-driven repayment plans

As of 2023, there are four IDR plans:

• Income-Based Repayment (IBR)

• Income-Contingent Repayment (ICR)

• Pay As You Earn (PAYE)

• Saving on a Valuable Education (SAVE)

Income-Based Repayment (IBR)

Under IBR, new borrowers — those who took out loans on or after July 1, 2024 — will pay 10% of their discretionary income and are in repayment for 20 years. Under IBR, discretionary income is defined as the difference between your income and 150% of the federal poverty guideline for your state and household size.

Borrowers that took out loans before July 1, 2024, pay 15% of their discretionary income and can be in repayment for as long as 25 years.

Income-Contingent Repayment (ICR)

ICR repayment requires the highest percentage of your discretionary income to go toward your payments; under ICR you pay 20% of your discretionary income. ICR has a stricter definition of discretionary income, too; it looks at the difference between your income and 100% of the federal poverty guideline, so less of your income is protected.

All borrowers enrolled in ICR are in repayment for 25 years.

ICR is notable as the only IDR plan available to borrowers with federal parent student loans, including Direct PLUS or FFEL parent loans. To enroll, parent borrowers must consolidate their loans with a Direct Consolidation Loan; afterward, they can sign up for ICR.

Pay As You Earn (PAYE)

Under PAYE, borrowers pay 10% of their discretionary income, but your payments will never exceed what you would've paid under a 10-year standard repayment plan. PAYE defines discretionary income as the difference between your income and 150% of the federal poverty guideline, and borrowers are in repayment for 20 years.

Saving on a Valuable Education (SAVE)

SAVE is the newest IDR plan; it was launched in 2023 to replace Revised Pay As You Earn (REPAYE).

SAVE is significantly different from the other IDR plans. It looks at the difference between your income and 225% of the federal poverty guideline, protecting more of your income. If you earn less than $32,800 ($67,500 for a family of four), your payments will be $0.

For borrowers who earn more than those limits, your payments are capped at 5% of your discretionary income if all of your loans were for undergraduate study. If any of your loans were for graduate school, you'll pay a weighted percentage of 5% to 10% of your discretionary income.

Borrowers with outstanding loan balances of $12,000 or less can qualify for loan forgiveness in as little as 10 years. Those who have larger balances can qualify for loan forgiveness in 20 years if they only had undergraduate loans and 25 if they had any graduate student loans.

How to apply for IDR forgiveness: student borrowers

If you have federal student loans, you can apply for an IDR plan and work toward loan forgiveness by following these steps:

1. If you have non-eligible loans, consolidate

Not all federal loan borrowers are eligible for IDR plans. If you have Parent PLUS, FFEL PLUS or other FFEL loans, you have to use a Direct Consolidation Loan to consolidate your education debt before you can enroll in an IDR plan.

You can consolidate your debt by contacting your loan servicer or by completing the Direct Consolidation Loan application online.

2. Collect documentation

The IDR application will ask for your adjusted gross income (AGI). If applying online, you can use the IRS Data Retrieval Tool to look up your most recent AGI, or you can use your own copy of your most recent federal income tax return to find the AGI.

If your income has significantly changed since you filed your tax return — for example, if you lost your job and now have a lower-paying position — you will need to provide alternative documentation to show your new income, such as recent paystubs.

2. Fill out the application

You can fill out the IDR application online at StudentAid.gov/IDR. You can also contact your loan servicer and request that it send you a paper application. If you have loans with multiple loan servicers, you must complete an application for each loan servicer.

On the application, you can choose a specific plan or you can request that your loan servicer put you in the repayment plan with the lowest overall payment.

Once you submit the application, the loan servicer will review your information and will enroll you in the appropriate plan. The loan servicer will notify you once the process is complete, and your new payment amount should appear on your online loan account.

3. Recertify your income every year

Every year, you must recertify your income and household size, meaning you must provide your loan servicers with your updated income and family information. You can recertify your income online.

Your loan servicer will notify you when it's time to re-certify, but you can recertify early if you have a significant change in your circumstances. For example, you may want to recertify early if you have a decrease in income or have a child.

Re-certifying is critical; if you don't recertify on time, you could be removed from your plan and put on an alternative payment plan, affecting your progress toward loan forgiveness.

4. Make your payments on time

To stay on track toward loan forgiveness, make all of your required payments on time. If you miss payments, those months will not count toward the time necessary for loan forgiveness.

Once you've reached the necessary amount of time in repayment, your loan servicer will automatically discharge your remaining student loans, and it will send you a notification detailing how much of your balance was forgiven.