October 27, 2021

What is Income Driven Repayment (IDR)?

Repayment

An IDR is an option offered by the government to potentially lower monthly student loan payments. It’s an option for those who are struggling to make payments. If you find yourself in a situation where you can’t make payments, then this might be the move to take. It also opens the door for loan forgiveness.

How Do I Get An IDR?

The first thing you’ll need is to sign on the Student Loans website using your Federal Student Aid ID (FSA ID). If you don’t have this ID yet, then visit the FSA ID website first. From there, you’ll fill in your personal information and spousal information if you have one.

Then, you’ll see a link to an IRS data tool. Inputting your personal information there will display your current tax return. You’ll then connect this information to the Student Loans website.

If the tax return doesn’t represent your current income, you’ll have to showcase proof of income from the last 90 days. It will include gross income before taxes. You don't have to report untaxed supplement income from the government. You’ll also have to submit a recent federal tax return.

Each year under the IDR, you’ll have to recertify your information to continue your qualification. If you experience a change in income, then your monthly payments will also change.

The Four IDR Plans

The government offers four different plans you can choose from. Here are some details on each:

1. Income Contingent Repayment (ICR)

The ICR only applies to those who have Direct Loans. It accounts for the adjusted gross income, the payer’s family size, and the Direct Loan balance. You’ll have to pay qualifying payments in 25 years, and the rest will be eligible for forgiveness.

2. Income Based Repayment (IBR)

IBR is applicable for Direct Loans and FFELP. It will take into account your student loan debt, family size, and adjusted gross income. Payers often have to give around 10 to 15% of discretionary income. The IBR lasts for 20 to 25 years, and the rest will become eligible for forgiveness.

3. Pay As You Earn (PAYE)

PAYE is only applicable for those with Direct Loans. You’ll have to pay around 10 percent of discretionary income. You’ll also have to prove that you are experiencing partial financial hardship. The plan goes for 20 years of qualifying payments before forgiveness.

4. Revised Pay As You Earn (REPAYE)

REPAYE is applicable to direct loans, and you will pay around 10 percent of discretionary income. You’ll pay for 20 to 25 years, depending on the studies you took. Not every student loan will be applicable for REPAYE. You’ll find out if you are eligible once you begin the application.

Consider Your Options Carefully

Entering into a repayment plan means committing to at least 20 years of payments. If you believe that you can pay your loan before that, IDR may not be the best option. Another course to take is refinancing a loan through a private lender, but you’ll lose eligibility for loan forgiveness. Make sure that IDR is the best option available before you commit to it.

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