#1 Student Loan Lawyer
Updated on April 6, 2023
Income-driven repayment plan forgiveness writes off your remaining loan balance after 20 or 25 years of monthly payments.
Navigating federal student loans can feel overwhelming for millions of borrowers enrolled in income-driven repayment plans.
The urgency to repay loans swiftly often leads to confusion and anxiety, particularly when confronted with multiple repayment options and different repayment periods.
In this article, we’ll simplify IBR Forgiveness and income-driven repayment plans for the 8.5 million borrowers in the system, offering valuable insights and actionable steps to help you manage your student loans efficiently and make well-informed financial decisions.
IBR vs. IDR Forgiveness: Key Differences
Although the terms “IBR Forgiveness” and “IDR Forgiveness” are often used interchangeably — and I’ll do so throughout this article — they have distinct meanings:
IBR Forgiveness: Refers to the forgiveness of student loan debt after making 20 or 25 years of payments under the Income-Based Repayment plan.
IDR Forgiveness: Refers to the forgiveness under any of the four Income-Driven Repayment (IDR) Plans, which include IBR, Income-Contingent Repayment (ICR), Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE).
Income-driven repayment plans and loan forgiveness
Income-driven repayment plans have come a long way since the debut of the first plan, Income-Contingent Repayment, back in 1995.
Over time, new plans were introduced through legislation and the Department of Education’s regulatory process, addressing limitations in earlier plans and responding to concerns about rising debt and post-2008 recession employment challenges.
Key features of income-driven repayment plans
Income-driven repayment (IDR) plans serve as a safety net for federal student loan borrowers struggling with payments on the 10-Year Standard Repayment Plan.
The plans offer reduced payments based on the borrowers’ adjusted gross income and 150% of the federal poverty line rather than the loan balance, extending repayment terms over 20 or 25 years.
Related: When Do Student Loans Go Away?
At the end of this term, any remaining balance is automatically forgiven.
Income-contingent repayment (ICR)
Income-Based Repayment (IBR)
Pay As You Earn (PAYE)
Revised Pay As You Earn (REPAYE)
Enrolling in an IDR Plan
To benefit from IDR forgiveness, you must first enroll in a plan. According to the U.S. Department of Education, enrollment takes about 10 minutes.
Using this site, you will enter your personal information into the Electronic Application, allow a transfer of tax information using the IRS Data Retrieval Tool, and review, electronically sign, and submit the completed form online.
Although you can apply online, contacting your loan servicer or a student loan attorney is a good idea for guidance.
To maintain your eligibility, be sure to recertify your income and family size yearly or whenever you experience a substantial change in income.
Marriage and IDR enrollment challenges
While the enrollment process is generally straightforward, marriage can introduce complications.
Enrolling in an IDR plan can be challenging for married borrowers — regardless of whether they file a joint or separate tax return — if one spouse doesn’t have student loans but has a high income.
Different repayment plans may require including the spouse’s income, potentially increasing the borrower’s monthly payments.
This unexpected rise in payments can disrupt a couple’s budget and complicate their financial management.
Related: Marrying Someone With Student Loans
Parents and IDR plans
Parent PLUS loan borrowers have limited repayment options to lower their monthly payment amount, with the Income-Contingent Repayment Plan as their primary choice.
In the ICR Plan, parents pay 20% of their discretionary income for 25 years, after which their outstanding balance is forgiven.
By choosing the ICR Plan, Parent PLUS borrowers can also qualify for Public Service Loan Forgiveness and comfortably transition to retirement with less worry about how they’ll afford their student loans.
Your entire remaining balance will be forgiven
There’s no cap on the amount of student debt forgiven through income-driven repayment forgiveness. For example, if you have $100,000 in student loans and meet the forgiveness criteria, the entire out could be forgiven.
Forgiveness Amount Depends on Repayment Progress
Your loan debt at the time of forgiveness depends on how much you’ve repaid. For example, if your income significantly increases, leading to larger payments, you might repay the entire debt before the loan term ends, leaving no debt to be forgiven.
You won’t owe income tax — at least until 2026
Previously, forgiven debt under income-driven plans was considered taxable income. But the March 2021 American Rescue Plan made forgiven debt tax-free from December 2020 until the end of 2025.
Some forbearance periods count toward forgiveness
During the federal student loan payment pause, which began on March 13, 2020, each month is considered a qualifying payment for income-driven repayment forgiveness for borrowers with loans owned by the Education Department.
For example, if the payment pause spans 36 months, these 36 months contribute to the twenty or twenty-five years of repayment, even without actual payments being made.
Borrowers holding commercially-owned Federal Family Education Loans can also obtain this credit by consolidating their FFEL Loans into a Direct Loan before the IDR Waiver is applied later this year. You can consolidate for free on the Federal Student Aid website, StudentAid.gov.
Related: Does Forbearance Count Toward PSLF?
How to qualify for IBR loan forgiveness
To be eligible for forgiveness (aside from the one-time account adjustment IDR Waiver mentioned below), you must enroll in an IDR Plan and meet at least one of these conditions during that period:
Income-based Monthly Payments. Made the required income-based monthly payments under the plan (payments of zero also qualify).
Post-Hardship Payments. Made the required monthly payments in IBR or PAYE after you no longer had a partial financial hardship or stopped making IBR or PAYE payments
Standard Plan Payments. Made monthly payments under any repayment plan that was not less than the amount required under the standard plan.
Original Standard Ten-Year Payments. Made monthly payments under the standard ten-year repayment plan for the amount of the borrower’s outstanding loans when the borrower first selected IBR or PAYE.
Other Income-Driven Payments. Made payments under one of the other income-driven repayment plans (including IBR, PAYE, REPAYE, and ICR), except income-sensitive repayment
Alternative Payment Plan. Made monthly payments under an alternative payment plan after the borrower did not timely provide income documentation under REPAYE if the borrower later returned to the REPAYE program or entered another income-driven repayment program.
Economic Hardship Deferment. Received an economic hardship deferment
The Education Department will cancel any outstanding principal and accrued interest balance as long as the borrower meets at least one condition above for each year for the applicable period.
This may include a combination of various qualifying monthly payments and economic hardship deferments.
The conditions above need not be met consecutively if the cumulative time satisfies the required forgiveness period.
Improvements to IDR Loan Forgiveness
Since moving into the White House, the Biden administration used its Covid-related powers to dismantle policies and regulations that prevented millions of borrowers from obtaining loan forgiveness under various programs, including the Public Service Loan Forgiveness Program and IDR Forgiveness.
One-Time Account Adjustment
Millions of borrowers will benefit from the IDR Waiver that will count past payments toward the 240 or 300 needed for IDR forgiveness. Later this year, the Education Department will display IDR payment counts on StudentAid.gov for borrowers who log into their accounts.
It also plans to use a one-time account adjustment to count more loan statuses, like deferments and forbearances, toward IDR forgiveness. But it’s unclear when these changes will take effect or which loan statuses will be included.
The one-time revision will apply to all federally held student loans, including PLUS loans for graduate students and parents helping with their children’s college education. The Biden administration estimates the waiver will result in automatic debt cancellation for tens of thousands of borrowers.
The department has advised borrowers with privately-held FFEL or Perkins Loans who want to take advantage of the extra credit toward forgiveness to consolidate those loans into a Direct Consolidation Loan before May 1, 2023.
A More Generous IDR Plan
The Department of Education introduced a new income-based repayment plan offering these benefits:
Borrowers earning less than $32,800 individually or $67,500 for a family of four will have $0 monthly bills.
Most other borrowers who borrowed undergraduate loans only will see their payments cut by at least half.
Students who borrow less than $12,000 will have their remaining balances forgiven after 10 years of payments instead of 20 to 25 years.
The new plan also has another benefit: it cancels unpaid interest.
Currently, interest continues to be added to your balance when your payment isn’t enough to cover the interest on your loans each month.
Under the revised plan, the government would cover any interest unpaid each month if you keep up with your monthly payments. This leftover interest would not accrue.
“Today, the Biden-Harris administration is proposing historic changes that would make student loan repayment more affordable and manageable than ever before,” said U.S. Secretary of Education Miguel Cardona. We cannot return to the same broken system we had before the pandemic when a million borrowers defaulted on their loans a year and snowballing interest left millions owing more than they initially borrowed.”
Don’t want to wait around for IDR forgiveness?
IBR Loan Forgiveness offers millions of federal student loan borrowers a significant opportunity. They receive affordable monthly payments and, after at least 20 years of payments, have their remaining balance forgiven.
Waiting 20 years for loan forgiveness can be daunting. Watching your balance grow due to interest, despite making payments, can be unsettling. During this time, changes in administration and policies may also cause concern. Your control lies in making payments and trusting the federal government to honor the forgiveness.
Refinancing federal loans with a private lender might make sense in certain situations. A new refinance loan with a lower interest rate can save money and help you become debt-free faster.
Keep in mind that refinancing federal loans into a private student loan carries risks, as you’ll lose access to programs like income-driven repayment and student loan forgiveness programs. Ensure you’re comfortable losing these options before refinancing.
Is income-driven repayment plan forgiveness 20 or 25 years?
Income-driven repayment plan forgiveness is 20 years for borrowers with only undergraduate loans enrolled in the REPAYE, PAYE, or IBR Plan. For those with Graduate PLUS Loans or Parent PLUS Loans, forgiveness is 25 years, regardless of the IDR plan chosen.
Are income-driven repayment plans forgiven after 10 years?
Income-driven repayment plans can be forgiven after 10 years if you are working towards loan forgiveness under the PSLF Program and making qualifying payments during that time.
But if you don’t work full time for the government or nonprofit entity, IDR Plans lead to loan forgiveness after 20+ years of payments.
Related: Student Loan Forgiveness After 25 Years
Which IDR plans have a forgiveness period of 20 years?
IDR plans offering a 20-year forgiveness period include:
- Pay As You Earn (PAYE) for undergraduate and graduate loans, accessible only to new borrowers without outstanding FFEL or Direct Loan balances on or after October 1, 2007.
- Income-Based Repayment (IBR) for undergraduate loans.
- Revised Pay As You Earn (REPAYE) for undergraduate loans.