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Income-Driven Repayment Plans



What to know about Income-Driven Repayment Plans

Income-driven repayment plans may offer lower payments because they are based on your income and family size. Payments can be as low as $0 per month, depending on your circumstances.

The following repayment plans are considered income-driven:

  • Revised Pay As You Earn (REPAYE)
  • Pay As You Earn (PAYE)
  • Income-Based Repayment (IBR)
  • Income-Contingent Repayment (ICR)

These repayment plans are unique:

  • Eligibility - Based on income, family size, your loan balance and the types of federal student loans you have.
  • Renewal - You must renew your repayment plan each year to have your payment amount recalculated.
  • Annual proof of income is required - Income documentation must be provided with your annual renewal.
  • Loan forgiveness opportunity - After you make 20-25 years of qualifying payments, your loans may be forgiven. These repayment plans also work for Public Service Loan Forgiveness.
  • Interest subsidy - REPAYE, IBR and ICR offer interest subsidies for some or all of your loans.


Learn more about Income-Driven Repayment Plans

The Department of Education has additional information about the repayment plans and the eligibility requirements for each.

Parent PLUS Loans do not qualify for IDR Plans. Borrowers with Parent PLUS loans may consolidate and request ICR.

If your consolidation loan was disbursed on or prior to 7/1/2006 and the consolidation loan includes Parent PLUS loans, your consolidation loan may not be eligible for IDR Plans.

FAQs about income-driven repayment plans are also available.


Importance of Renewing Income-Driven Repayment Plans

When you are on an income-driven repayment plan, you will receive annual notifications when it is time for you to re-certify your income and family size. When you submit your new Income-Driven Repayment Plan Request, we will recalculate your monthly payment amount. It is important that you renew your plan each year.


What will happen if I don't re-certify my income and family size by the annual deadline?

It’s important for you to re-certify your income and family size by the specified annual deadline. If you don’t re-certify your income by the deadline, the consequences vary depending on the plan.

  • Under the REPAYE Plan, if you don’t re-certify your income by the annual deadline, you’ll be removed from the REPAYE Plan and placed on an Alternative Repayment Plan. Under this Alternative Repayment Plan, your required monthly payment is not based on your income. Instead, your payment will be the amount necessary to repay your loan in full by the earlier of 10 years from the date you begin repaying under the Alternative Repayment Plan, or the ending date of your 20- or 25-year REPAYE Plan repayment period. You may choose to leave the Alternative Repayment Plan and repay under any other repayment plan for which you are eligible. Payments on the REPAYE Alternative Repayment Plan do not count toward Public Service Loan Forgiveness.
  • Under the PAYE Plan, the IBR Plan, or the ICR Plan, if you don’t re-certify your income by the annual deadline, you’ll remain on the same income-driven repayment plan, but your monthly payment will no longer be based on your income. Instead, your required monthly payment amount will be the amount you would pay under a Standard Repayment Plan with a 10-year repayment period, based on the loan amount you owed when you initially entered the income-driven repayment plan. You can return to making payments based on income if you provide MOHELA with updated income information, and if your updated income still qualifies you to make payments based on income.

In addition to the consequences described above, if you don’t re-certify your income by the annual deadline under the REPAYE, PAYE, and IBR plans, any unpaid interest will be capitalized (added to the principal balance of your loans). This will increase the total cost of your loans over time, because you will then pay interest on the increased loan principal balance.

Under all of the income-driven repayment plans, if you don’t re-certify your family size each year, you’ll remain on the same repayment plan, but MOHELA will assume that you have a family size of one. If your actual family size is larger, but MOHELA assumes a family size of one because you didn’t re-certify your family size, this could result in an increased monthly payment amount or (for the PAYE and IBR plans) loss of eligibility to make payments based on income.


If I’m removed from the REPAYE Plan because I didn’t re-certify my income by the annual deadline, is it possible to return to the REPAYE Plan?

You can return to the REPAYE Plan only if you provide MOHELA with documentation of your income for the period when you were not on the REPAYE Plan. Depending on how long it has been since you left or were removed from REPAYE, this could be the same income documentation that you would normally submit to enter REPAYE (like your most recent tax return), or it could be income documentation from prior years.

MOHELA will then calculate what your monthly payment amount would have been under the REPAYE Plan during that period, and will compare this amount to your monthly payment amount under the Alternative Repayment Plan (or any other plan) over the same period.

If the amount you would have been required to pay under the REPAYE Plan is more than what your monthly payment amount was under the Alternative Repayment Plan or another plan during this period, your new REPAYE Plan payment amount will be increased. The amount of the increase will be equal to the difference between what you were required to pay during the period when you were not on the REPAYE Plan, and the amount you would have been required to pay if you had remained on the REPAYE Plan, divided by the number of months remaining in your 20- or 25-year repayment period.

For example:
You received loans for undergraduate study and begin repaying those loans under the REPAYE Plan when they first enter repayment. Because all of the loans you are repaying under REPAYE were received for undergraduate study, your repayment period is set at 20 years.

After your first year of repayment under the REPAYE Plan, you do not re-certify your income.

Starting with year 2 of repayment, you are placed on the Alternative Repayment Plan. Your repayment period is set at 10 years, because 10 years is less time than the remaining portion (19 years) of your REPAYE Plan repayment period.

Your payment amount under the Alternative Repayment Plan is $200 per month, and you pay this amount for 12 months.

You decide to reenter REPAYE and provide the necessary documentation to your loan servicer. Your loan servicer determines that your REPAYE payment amount for the past year would have been $300 per month.

You paid $1,200 less over the course of the year under the Alternative Repayment Plan than you would have paid during the same period under the REPAYE Plan.

When you reenter REPAYE, you will have 18 years of your repayment period remaining, so the $1,200 is divided by 216 (there are 216 months in 18 years), which equals $5.55 per month. This amount will be added to your payment amount each month that you remain in REPAYE.

Your payment amount under REPAYE for the upcoming year (based on newer income documentation) will be $150 per month.

After the increase is added in, your total REPAYE payment will be $155.55 per month for the next year.