Differences between ICR, IBR, PAYE and REPAYE Student Loan Repayment
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By Mark Kantrowitz

March 29, 2021

Let’s face it: nobody likes having student loan debt. Fortunately, there are different income-driven repayment plans, such as income-based repayment (IBR), available that can help you pay off your student loans faster.

The U.S. Government offers several income-driven repayment plans that allow you to spread your monthly federal student loan payments out over several years — and the amount you pay is based on your income and the size of your family.

There are currently four main income-driven repayment plans:

There’s also a little-used Income-Sensitive Repayment (ISR) plan in the Federal Family Education Loan Program (FFELP). 

This guide will explain how these plans work and help you pick the best income driven student loan for you to get your college education.

What are the different types of income driven repayment plans?

There are four types of income driven repayment plans that you can generally enroll in if you have a federal student loan.

Breakdown of payment requirements and term length for each of the 4 Income-Driven Repayment Plans

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Income-based repayment plan (IBR)

With an income-based repayment (IBR), your student loan payment is 15% of your discretionary income (or 10% if you’re a new borrower as of July 1, 2014).

Discretionary income is the income that remains after subtracting allowances for mandatory expenses, such as taxes and basic living expenses.

With federal IBR plans, any debt you owe after making 300 payments will be forgiven. That equates to 25 years’ worth of loan repayments before the debt forgiveness kicks in (or 20 years if you’re a new borrower).

IBR payment plans are available for Federal Family Education Loan Program (FFELP) student loans and the Direct Loan program.

IBR caps the monthly payment at the standard payment amount based on the loan balance when the borrower started IBR. So, when a borrower is no longer eligible for a reduced payment because their income has increased, IBR limits the monthly payment from growing larger.

Income-contingent repayment (ICR)

Income-contingent repayment (ICR) plans were the first type of income-driven repayment plans introduced by the U.S. federal government.

An ICR plan is like an IBR plan in that ICR plans also calculate the borrower’s repayments based on their discretionary income.

After looking at your AGI, ICR plans will require the borrower to repay 20% of their discretionary income.

Just like IBR plans, all outstanding debt on ICR plans is forgiven after 25 years.

Pay-as-you-earn (PAYE)

Pay-as-you-earn (PAYE) repayment plans also base monthly student loan payment amounts on the borrower’s discretionary income.

PAYE plans base discretionary income on your adjusted gross income (AGI) from your federal income tax returns. But PAYE bases payments on 10% of the borrower’s discretionary income.

Like IBR and ICR plans, a student loan borrower on a PAYE repayment plan can have the remaining balance of their debt forgiven. But the government forgives PAYE debt after 240 repayments (or 20 years).

Borrowers with debts that exceed two-thirds of their annual income at the point of graduation will benefit from reduced monthly payments under PAYE.

PAYE is available only for student loans disbursed as part of the Direct Loan program.

Revised pay-as-you-earn (REPAYE)

Revised pay-as-you-earn (REPAYE) repayment plans are an updated version of the pay-as-you-earn (PAYE) income-driven repayment plan.

Like the PAYE plan, REPAYE plans use 10% of your discretionary income to calculate your monthly loan repayments.

But there are a couple key differences between REPAYE and PAYE plans.

The first difference is that REPAYE payments could be higher than the 10-year Standard Repayment amount.

The second difference is that the repayment term for a REPAYE loan is 25 years if the borrower has any graduate student loans. 

Only loans disbursed through the Direct Loan program are eligible for REPAYE.

Just like PAYE, REPAYE borrowers with debts exceeding two-thirds of their annual income at the point of graduation will benefit from lower monthly payments.

Am I eligible for income-driven repayment?

The U.S. Government’s income-driven repayment plans are all fairly inclusive.

That means the eligibility requirements are pretty broad, and a large proportion of borrowers with federal student loans will likely be eligible for at least one income-driven repayment option.

That being said, there are slightly different eligibility requirements for each income-driven repayment plan.

The Office of Federal Student Aid has an online guide to help determine repayment plan eligibility.

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Income-based repayment (IBR)

To qualify for an income-based repayment (IBR) plan, the payment you’re required to make must be less than what you’d repay under the 10-year Standard Repayment Plan.

That’s because if the monthly payments you’d be making are higher than standard plan payments, you wouldn’t benefit from your plan being income-driven.  That means you won’t qualify.

But generally speaking, you’ll probably qualify for an IBR student loan if your student loan debt is bigger than your annual income.

Income-contingent repayment(ICR)

Any borrower with an eligible federal student loan should be able to make payments under an ICR plan.

It’s also important to note that the ICR repayment plan is the only income-driven option available for parent PLUS loan borrowers.

Pay-as-you-earn (PAYE)

Pay-as-you-earn (PAYE) repayment plan eligibility requirements are identical to the income-based student loan repayment (IBR) plan.

If the payment you’re required to make is going to be lower than what you’d be repaying each month under the 10-year Standard Repayment Plan, you’ll likely qualify.

Revised pay-as-you-earn (REPAYE)

Revised pay-as-you-earn (PAYE) repayment plans have the broadest set of eligibility requirements.

Any federal student loan borrower with eligible federal student loans through the Direct Loan program can choose to make repayments under the REPAYE plan.

The only thing to bear in mind is that REPAYE is only available for loans disbursed through the Direct Loan program. So borrowers with other loan types are not eligible for REPAYE.

What are the differences in calculating the monthly loan payments for each plan?

Each type of income driven repayment plan is similar in that they all use your discretionary income and family size to calculate your monthly payments. In 2019, the US Federal Reserve reported that the average student loan repayment was between $200 and $299 per month.

But some plans use a different proportion of your discretionary income when calculating payments.

This SavingforCollege chart illustrates how monthly loan payments are calulated for different IDR plan type.

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Income-based repayment plan (IBR)

Income-based repayment (IBR) plans generally calculate your monthly payments as 10% of your discretionary income. This rate only applies to new borrowers on or after July 1, 2014.

If you took out a student loan before July 2014, your monthly loan payment for an IBR will be 15% of your discretionary income.

IBR repayments are capped by the 10-year Standard Repayment Plan amount.

That means no matter when you took out your loan, you’ll never pay more than the standard monthly payment amount.

The IBR minimum monthly payment is $10 unless your calculated monthly payment would be $5 or less.

In that case, the monthly payment is $0.

Income-contingent repayment plan (ICR)

Income-contingent repayment (ICR) plans calculate monthly repayments as either 20% of your AGI discretionary income or the amount you’d pay on a fixed repayment plan over the course of 12 years.

Your ICR monthly payment will then be whichever value is lower.

Unlike IBR plans, ICR monthly payments have no cap. That means you could end up paying more per month than the 10-year Standard Repayment Plan if your income is high enough.

The minimum payment with an ICR plan is $5 (unless the calculated payment is zero, in which case the payment is $0).

Pay-as-you-earn (PAYE) repayment plan

Pay-as-you-earn (PAYE) repayments are calculated as 10% of your discretionary income.

Like Income-based repayment (IBR) plans, monthly PAYE payments are capped at the value of the Standard Repayment Plan.

The PAYE minimum monthly payment is $10 unless your calculated monthly payment would be $5 or less. In that case, the monthly payment is $0.

Revised pay-as-you-earn (REPAYE) repayment plan

Revised pay-as-you-earn (REPAYE) calculates monthly payments just like PAYE: 10% of the borrower’s discretionary income based on AGI.

But unlike PAYE, monthly REPAYE payments aren’t capped.

That means you could end up paying more each month than you would with a 10-year Standard Repayment Plan.

The REPAYE minimum monthly payment is $10 unless your calculated monthly payment would be $5 or less. In that case, the monthly payment is $0.

How Long Does it Take to Pay Off a Student Loan?

The repayment period (also known as the “student loan term”) depends on how much you borrowed, the type of student loan and whether you take advantage of a special program for loan forgiveness.

In terms of borrowing amounts, the average student debt in 2019 was between $20,000 and $24,999

How long it takes to repay a federal student loan depends on the repayment plan you choose. The standard, or default plan, has a 10-year repayment. The graduated repayment plan is also 10 years, and the extended plan is 25 years. All of the income-driven repayment plans take 20 or 25 years to repay.  

How long it takes you to repay your student loans also depends on if you are making extra payments or only making the minimum payment or if you pause payments with a deferment.

For instance, if you pause payments then 300 payments could work out to more than 25 years with income-driven repayment plans. The important number to pay attention to here is the number of payments, not years. 

Use the SavingforCollege Loan Calculator to find out how long it takes to repay federal student loans.

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The amount of time it takes to repay a private student loan is totally different than federal student loans, since private student loans do not offer options for income-driven repayment plans. How long it will take you to repay a private loan depends on your the loan term your lender has given you. This can range from 5 to 25 years. Other factors that will influence how long it will take you to repay a private loan is if you’re able to make more than the minimum payment and what your interest rate it is.

Income-based repayment (IBR) student loan plan

Income-based repayment (IBR) plans have a 25 year repayment term. That means it’ll take you 300 payments to repay your debt.

At the end of your IBR’s 25-year term, the government will forgive any debt that’s left will be forgiven.

Income-contingent repayment plan (ICR)

Income-contingent repayment (ICR) plans use the same standard of payments before forgiveness as IBR plans. That means it should take you 25 years to repay your ICR student loan.

At the end of 25 years (300 payments), anything you’ve still got left to pay back will be forgiven.

Pay-as-you-earn (PAYE) repayment plan

Pay-as-you-earn (PAYE) repayment plans offer the shortest possible repayment term length at 20 years. That equates to a total of 240 monthly payments.

Just like with IBR and ICR plans, PAYE repayment plans benefit from student loan forgiveness which kicks in after the end of the original student loan term.

Revised pay-as-you-earn (REPAYE) repayment plan

Revised pay-as-you-earn (PAYE) repayment plans have a student loan term of 20 years for undergraduate loans. That means it’ll take 240 payments to repay your student loan with a REPAYE plan.

If you borrowed money to pay for graduate school, your loan term under this repayment plan is 25 years instead of 20 years.

That means it’ll generally take you longer to pay back a student loan with a REPAYE plan than it would with a PAYE plan.

The government will forgive any remaining loan balance at the end of your 20- or 25-year REPAYE plan.

Can my student loan get even bigger even while I’m making IBR payments?

Unfortunately, yes. Just because you make your payments on time doesn’t necessarily mean you’re paying down your student loan.

Income driven repayment plans focus more on monthly payment relief than total debt reduction. As a result, your payment may not be enough to cover the interest.

As a result, borrowers can be negatively amortized under some programs. Negative amortization happens when your monthly payments aren’t enough to cover the interest, and the remaining interest is added back to your principal balance.

There are limits to this new interest accrual (addition), and they vary depending on the repayment plan used. The federal government may pay some of the accrued but unpaid interest on subsidized and in an income-driven repayment plan, as shown in this table.

This SavingforCollege chart illustrates how much and when the federal government may assist borrowers in paying accrued interest with an IBR student loan repayment plan.

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Conclusion

Student loans are a big decision. It’s important to understand the interest rate rules, how long you’ll have to repay the loan (the student loan term), how the payments are calculated, and current rule changes before making a choice.

And while no one wants to not be able to pay back what they borrowed, knowing the forgiveness options can save a lot of grief later.

Income-driven repayment plans take your income into consideration. That lets these programs set lower payments that work for a larger number of people as they exit college and start their careers on their own.

While not for everyone, IBR and other income driven repayment plans are a good choice for many who need help paying off their student loans. Borrowers who don’t qualify for federal repayment plans may also consider refinancing their student loans.

Ready to learn more about income-driven payment plans? Use an ICR calculator, IBR calculator, PAYE calculator and REPAYE calculator to find out how they could help you repay your student debt.

A good place to start:

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