Definition
Federal student loan plans that set your monthly payment based on your income and family size, with any remaining balance forgiven after many years.
What it means
Income-driven repayment plans tie your federal student loan payment to your income. Payments are recalculated each year, and if you still owe a balance after the required number of qualifying years, the rest can be forgiven. These rules are changing. Under a 2025 law, the Department of Education opened the Repayment Assistance Plan (RAP) and a Tiered Standard plan on July 1, 2026. RAP payments are a percentage of adjusted gross income, reduced by $50 per dependent, with a $10 monthly minimum, and any remaining balance may be forgiven after 30 years of qualifying payments. Borrowers with any loan disbursed on or after July 1, 2026 are limited to these new plans, and older plans such as SAVE, PAYE and ICR are being closed. Parent PLUS loans cannot use RAP.
Example
Under an IDR plan, a borrower's payment is recalculated each year from the income on their tax return, so a pay cut can lower the payment at the next recertification.
Illustrative numbers only. Your situation will differ.