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The Top 5 Things to Know About IDR

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Income-Driven Repayment (IDR) is a federal program designed to make repaying student loans more manageable for borrowers. In late 2023, over 10 million borrowers were enrolled in Income-Driven Repayment plans, collectively managing over $603 billion in federal student loan debt. Here are the top five things you need to know about IDR plans to decide if it’s right for you:

1. Your Monthly Payment Will Never Be More Than You Can Afford

The primary benefit of IDR plans is that they cap your monthly loan payments based on your income and family size. This ensures that your loan payments are affordable, even if you’re earning a modest income. If you’re in a low-income profession or experiencing financial hardship, your monthly payment could be as low as $0.

2. You Pay Less Over the Life of Your Loan

By making your payments more affordable, IDR plans can of course reduce the amount you pay each month—and while in a traditional loan, that might lead to paying more interest over time, that’s not necessarily the case with IDR. Many borrowers may ultimately pay less over the life of the loan due to loan forgiveness provisions. After 10-25 years of qualifying payments, the remaining loan balance can be forgiven, meaning that the combination of affordable monthly payments and eventual forgiveness can significantly reduce the total amount paid compared to traditional repayment plans. For many, this immediate relief and long-term benefit make IDR a crucial solution.

3. IDR is for Federal Loans Only

IDR plans are available exclusively for federal student loans. If you have private student loans, you won’t be able to enroll in these plans. Federal student loans include Direct Loans, FFEL (Federal Family Education Loan) Program loans, and Perkins Loans, among others. Keep in mind that certain loan types dictate the IDR plan for which you can enroll.

4. You Can Be Publicly or Privately Employed

While the Public Service Loan Forgiveness (PSLF) is only available to borrowers working in the public or nonprofit sector, IDR is available to those who work for private organizations, too. This makes IDR more accessible to more people. 

5. You May Be Eligible for the Saving on a Valuable Education (SAVE) Plan

The Saving on a Valuable Education (SAVE) plan is the latest addition to the IDR family and could be the most important one to know about. SAVE offers more generous terms for borrowers, reducing monthly payments even further than previous plans. It also offers a quicker path to loan forgiveness for low-balance borrowers. It’s designed to provide even greater flexibility and support, making it an important option to consider when evaluating repayment plans.

 

By keeping these five things to know about IDR in mind, you can better understand how these repayment strategies work and how they might benefit you. These plans are designed to ensure you never pay more than you can afford, and to offer an option for student loan forgiveness to as many borrowers as possible. 

 

Resources:

https://fsapartners.ed.gov/knowledge-center/library/electronic-announcements/2023-12-20/federal-student-aid-posts-new-quarterly-reports-fsa-data-center