Income-Driven Repayment Plans 2026: SAVE, IBR, PAYE, and ICR Compared

Federal student loan borrowers have access to income-driven repayment (IDR) plans that cap monthly payments based on income and family size rather than loan balance. After 20 or 25 years of payments, the remaining balance is forgiven. For borrowers with high debt relative to income, particularly those in public service or lower-paying fields, income-driven repayment can mean paying significantly less over the life of the loan than standard repayment would require. The four plans currently available are SAVE, IBR, PAYE, and ICR, and choosing the right one requires understanding how each calculates your payment.

SAVE: The Newest and Generally Most Generous Plan

The Saving on a Valuable Education (SAVE) plan replaced the REPAYE plan in 2023 and includes significant improvements for most borrowers. SAVE calculates payments at 5% of discretionary income for undergraduate loans and 10% for graduate loans, with a 225% federal poverty guideline exclusion from income, which is the most generous income exclusion of any IDR plan. A single borrower earning $30,000 per year has a federal poverty level exclusion of roughly $33,225 (225% of $14,580), which means their calculated discretionary income for SAVE purposes is actually negative, resulting in a $0 monthly payment.

SAVE also eliminates interest capitalization beyond the point of enrollment, meaning if your payment does not cover your monthly interest, the unpaid interest does not get added to your principal balance and does not compound. Under older plans, borrowers in low-payment situations could watch their balance grow indefinitely even while making payments. SAVE fixes this. Forgiveness under SAVE comes after 10 years for borrowers with original balances of $12,000 or less, and after 20-25 years for larger balances depending on whether loans are undergraduate or graduate. Note that as of 2026, SAVE has been subject to ongoing litigation that has affected its implementation.

IBR: The Long-Standing Plan Available to All Federal Borrowers

Income-Based Repayment (IBR) is available to the broadest group of borrowers and has two versions. For borrowers who took their first loans before July 1, 2014, IBR caps payments at 15% of discretionary income with forgiveness after 25 years. For new borrowers after July 1, 2014, IBR caps payments at 10% of discretionary income with forgiveness after 20 years. Discretionary income under IBR is calculated based on 150% of the federal poverty guideline.

IBR has a cap that SAVE does not: payments under IBR cannot exceed what you would pay under the 10-year standard repayment plan. This cap protects high-income borrowers from paying more on IBR than they would on standard repayment, but it also means that for borrowers whose income rises significantly over time, their IBR payment may eventually equal the standard payment amount. At that point, the remaining balance grows without any income-based cap benefit. IBR is still a strong option for borrowers pursuing Public Service Loan Forgiveness, where 10 years of payments lead to full forgiveness regardless of remaining balance.

PAYE: 10% of Discretionary Income With 20-Year Forgiveness

Pay As You Earn (PAYE) was introduced in 2012 and is available only to newer borrowers who took their first federal loan after October 1, 2007, and received a disbursement after October 1, 2011. It caps payments at 10% of discretionary income based on 150% of the federal poverty guideline, with forgiveness after 20 years. PAYE has the same payment cap as the new-borrower version of IBR and produces identical monthly payments for most borrowers.

The main distinction of PAYE from IBR is historical. PAYE was previously considered more favorable because of its 20-year forgiveness timeline regardless of when loans were taken, while IBR at 10% required the post-2014 borrower status. With the introduction of SAVE, PAYE is less unique than it was. Borrowers who are already enrolled in PAYE and benefiting from it may have no reason to switch, but new borrowers choosing between plans for the first time will often find SAVE more advantageous.

ICR: The Oldest Plan, Now Mostly Used for Parent PLUS Loans

Income-Contingent Repayment (ICR) is the oldest income-driven plan and in many ways the least generous. ICR calculates payments at the lesser of 20% of discretionary income or what you would pay on a 12-year standard repayment plan adjusted for income. Discretionary income under ICR is based on 100% of the federal poverty guideline, the least generous exclusion of any plan. Forgiveness comes after 25 years.

ICR is most relevant today because it is the only IDR plan available for Direct PLUS Loans taken by parents on behalf of children. Parent PLUS loans are not eligible for IBR, PAYE, or SAVE directly. However, a parent can consolidate their PLUS loans into a Direct Consolidation Loan, and the resulting consolidated loan can then be enrolled in ICR. This is often a critical strategy for parents with large PLUS loan balances who need to reduce their monthly payments.

Tax Implications of Forgiven Student Loan Debt

When a balance is forgiven under an income-driven repayment plan, the forgiven amount has historically been treated as taxable income in the year of forgiveness. The American Rescue Plan Act exempted IDR forgiveness from federal income tax through 2025. As of 2026, the status of this exemption and its extension is subject to ongoing legislative developments. If the exemption expires without renewal, a borrower who receives $100,000 in IDR forgiveness would owe income tax on that $100,000 in the year it is forgiven, which could be a substantial bill.

Public Service Loan Forgiveness (PSLF) forgiveness has permanently been tax-free at the federal level. If you are working toward PSLF, your forgiven balance will not be taxed regardless of the IDR forgiveness tax rules. This is a meaningful advantage of the PSLF path for public servants. Use our student loan calculator to model your monthly payment and total cost under different repayment plans, and see our comprehensive guide to student loan forgiveness options for the full picture on paths to debt elimination.