Income Based Student Loan Programs

When student loan payments in repayment become too much for your monthly budget, income based student loan programs are there to help make the payments more affordable.  These income based repayment options adjust your payment to a percentage of your discretionary income, the income difference between the household’s adjusted gross income and 150% of the poverty line.

These programs include:

  1. PAYE PLAN- Pay as you Earn Plan. This income based repayment program is also for Federal Direct Loans and requires that you be a new borrower as of October 2007 with a loan disbursement on or after October 2011. After a showing of “partial financial hardship“, a calculation showing that your standard repayment exceeds a payment based on 10% of your adjusted gross income less 150% of the poverty line. After 20 years of payments, any unpaid amounts will be forgiven. The forgiveness amount will be imputed as income by the IRS, so the there may be a few payments to the IRS after the forgiveness.
  2. REPAYE PLAN-Revised Pay as you Earn. This more generous version of the PAYE program was launched by the Department of Education in 2015. The program is available to all borrowers with Federal Direct Loans, not just new borrowers under the definition provided in the PAYE plan.
  3. IBR PLAN- Income-Based Repayment.  This program looks at your income and family size every year to adjust the payment through a re-certification where a new application is submitted each year.
  4. ICR PLAN- Income-Contingent Repayment.  This income based repayment program is only available for Federal Direct Loans. Be careful with this program because sometimes the income contingent payment could calculate to higher than the standard repayment monthly payment!

To find out whether your loans qualify for one of these programs and more detailed information about these programs, visit