Income-driven repayment plans are loan repayment options that tie monthly payments to the borrower’s individual income. This type of repayment plan is available for federal student loans, and it is designed to make repaying student loans more affordable. The five income-driven repayment plans for 2023 are Income-Contingent Repayment (ICR), Income-Based Repayment (IBR), Pay As You Earn Repayment (PAYE), Revised Pay As You Earn Repayment (REPAYE), and Income-Sensitive Repayment (ISR).
Income-Contingent Repayment (ICR)
Income-Contingent Repayment (ICR) is an income-driven repayment plan offered by the Department of Education. This repayment plan requires borrowers to pay 20 percent of their discretionary income each month towards their student loan debt, with a maximum repayment period of 25 years. During this period, the borrower’s monthly payment amount can vary based on their income. After 25 years, any remaining balance is forgiven. ICR is the only income-driven repayment plan that is available for Parent PLUS loans.
Income-Based Repayment (IBR)
Income-Based Repayment (IBR) is an income-driven repayment plan offered by the Department of Education. This repayment plan requires borrowers to pay 15 percent of their discretionary income each month towards their student loan debt, with a maximum repayment period of 20 years. During this period, the borrower’s monthly payment amount can vary based on their income. After 20 years, any remaining balance is forgiven. IBR is available for Direct and FFEL loans, and Parent PLUS loans that have been consolidated into a Direct Consolidation Loan.
Pay As You Earn Repayment (PAYE)
Pay As You Earn Repayment (PAYE) is an income-driven repayment plan offered by the Department of Education. This repayment plan requires borrowers to pay 10 percent of their discretionary income each month towards their student loan debt, with a maximum repayment period of 20 years. During this period, the borrower’s monthly payment amount can vary based on their income. After 20 years, any remaining balance is forgiven. PAYE is available for Direct loans and Direct Consolidation loans.
Revised Pay As You Earn Repayment (REPAYE)
Revised Pay As You Earn Repayment (REPAYE) is an income-driven repayment plan offered by the Department of Education. This repayment plan requires borrowers to pay 10 percent of their discretionary income each month towards their student loan debt, with a maximum repayment period of 20 years. During this period, the borrower’s monthly payment amount can vary based on their income. After 20 years, any remaining balance is forgiven. REPAYE is available for Direct loans and Direct Consolidation loans.
Income-Sensitive Repayment (ISR)
Income-Sensitive Repayment (ISR) is an income-driven repayment plan offered by the Department of Education. This repayment plan requires borrowers to pay a percentage of their income each month towards their student loan debt, with a maximum repayment period of 10 years. The percentage of income is determined by the lender, and it depends on the borrower’s total income, family size, and the total amount of their student loan debt. After 10 years, any remaining balance is forgiven. ISR is available for FFEL loans.
Conclusion
Income-driven repayment plans are an important tool for borrowers who are having difficulty managing their student loan debt. The five income-driven repayment plans for 2023 are Income-Contingent Repayment (ICR), Income-Based Repayment (IBR), Pay As You Earn Repayment (PAYE), Revised Pay As You Earn Repayment (REPAYE), and Income-Sensitive Repayment (ISR). These plans provide borrowers with an option to reduce their monthly payments and make repaying their student loan debt more manageable.