How to Save Money on Student Loans with Income-Driven Repayment Plans

Nov 04, 2023 By Susan Kelly


Student loans can often be a significant financial burden, but with income-driven repayment plans, borrowers have an opportunity to make their loan payments more manageable. These plans base your monthly payment on your income and family size, potentially reducing your payment to a more affordable amount. Here's how you can save money on student loans using income-driven repayment plans:

Understanding Income-Driven Repayment Plans

Income-driven repayment plans are a type of student loan repayment plan that calculates your monthly payments based on your discretionary income. This is the difference between your adjusted gross income and 150% of the poverty guideline for your family size and state of residence. There are four main types of income-driven repayment plans: Revised Pay As You Earn (REPAYE), Pay As You Earn (PAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR).

Benefits of Income-Driven Repayment Plans

There are several benefits to using an income-driven repayment plan. Firstly, they can significantly reduce your monthly payments, making them more affordable. Secondly, they offer loan forgiveness after 20 or 25 years of payments, depending on the plan. This means that if you haven't paid off your loan in full by then, the remaining balance will be forgiven. Additionally, these plans can help you avoid default by keeping your payments manageable.

How to Qualify for an Income-Driven Repayment Plan

To qualify for an income-driven repayment plan, you must have a federal student loan and be enrolled in an eligible repayment plan. You'll also need to provide documentation of your income and family size. The specific requirements may vary depending on the plan you choose.

How to Apply for an Income-Driven Repayment Plan

Applying for an income-driven repayment plan is a relatively straightforward process. You'll need to contact your loan servicer and request to be enrolled in the plan. They will then provide you with the necessary forms and instructions to complete your application. Once your application is approved, your monthly payments will be adjusted accordingly.


Income-driven repayment plans can be a valuable tool for borrowers struggling to make their student loan payments. By basing your payments on your income and family size, these plans can help make your payments more affordable and avoid default. Additionally, they offer loan forgiveness after a set period of time, providing further relief for borrowers. If you're struggling with your student loan payments, consider enrolling in an income-driven repayment plan today.


Will an income-driven repayment plan affect my credit score?

Enrolling in an income-driven repayment plan will not directly affect your credit score. However, if you make late payments or default on your loan, this could negatively impact your credit. It's important to make your payments on time and in full to maintain a good credit score.

Can I switch between income-driven repayment plans?

Yes, you can switch between income-driven repayment plans if your financial situation changes. Contact your loan servicer to discuss your options and complete the necessary paperwork to make the switch.

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