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Understanding income-driven repayment plans

If you are looking for a better way to manage your student loan payments, you may want to consider an income-driven repayment plan. An income-driven plan takes into account your income along with your family size, which can reduce the amount that you owe each month. These plans could improve your financial life especially if you are currently struggling to afford your federal loan payments, are unemployed or otherwise qualify for loan forgiveness.

Understanding income-driven repayment plans


Although they are the right fit for some people, income-driven repayment plans aren’t for everyone. They can potentially increase the amount of interest you owe over time, and can also differ depending on whether you are single or married, so it’s important to consult a financial professional before making any major changes.


The federal government offers four different kinds of income-driven repayment plans

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

The PAYE and REPAYE plans offer payments that equal roughly 10% of your discretionary income, divided into 12 even monthly payments. This amount is based on adjusted gross income, family size and total eligible federal student loan balance. Notably, these repayment plans are only available for Direct Loan holders.

The IBR plan is a repayment plan with monthly payments that are generally equal to 15% of your discretionary income (or 10% if you are a new borrower), divided into 12 even monthly payments. Those who are either FFEL Program or Direct Loan holders are eligible for this repayment plan.

The ICR plan features monthly payments that are the lesser of these two scenarios:

  • The amount you would pay on a repayment plan with a fixed monthly payment over 12 years, adjusted based on your income, or
  • 20% of your discretionary income, divided by 12.

The ICR plan is also the only option available for parent PLUS loan borrowers.

The Student Loan team at First Tech Federal Credit Union understands all of your options, and are happy to help you make sense of it all. Call 1.888.422.5680 for a no-cost, no-obligation phone consultation, or visit for more ways to manage your student loans.