All borrowers with loans in good standing qualify for at least one of the income-driven repayment plans, but some plans are off-limits depending on the borrower’s income and the type of loans they have. Defaulted federal student loan debt can’t be repaid under any IDR plan until the default status is removed.
For example, you must have a partial financial hardship to qualify for the IBR or PAYE plans. There’s a lot of math that goes into this calculation, but it boils down to this: You have a financial hardship if your monthly payments under those plans would be lower than the payments would be under the 10-Year Standard Repayment Plan.
Your monthly payment amount is tied to your adjusted gross income, family size, loan balance, and interest rate. The more money you make, the fewer children you have, and the lower your loan balance, the less likely it is that you’ll have a partial financial hardship.
Similarly, the PAYE and REPAYE plans are open only to people who borrowed Direct Loans to pay for their college education. Parents who borrowed federal loans to cover their children’s education costs can never repay their Parent PLUS Loans under those plans — even if they roll them into a Direct Consolidation Loan. Parent borrowers can only use the IDR Plan that leads to the highest monthly payment: income-contingent repayment.
Related: Income-Driven Repayment for Private Student Loans
IDR eligibility requirements
IBR – You must have a partial financial hardship and loans made through the Direct Loan or Federal Family Education Loan Programs, including Stafford Loans (both subsidized and unsubsidized) and Grad Plus Loans. Perkins loans are eligible for the plan if they’re consolidated.
ICR – Open to all borrowers except those with Parent PLUS Loans or Perkins Loans. Both loan types are eligible for this repayment option if consolidated. But parent loans must be added to a Direct Consolidation Loan to qualify. If you previously consolidated a parent loan into an FFEL Loan, you’ll need to submit a new loan consolidation application with the Education Department before accessing the ICR plan.
PAYE – Open to new borrowers with Direct Loans. You would be a new borrower if the first time you borrowed a federal student loan was on or after Oct. 1, 2011. You’re also a new borrower if you took out a loan after Oct. 1, 2007, and didn’t have an outstanding balance on a federal loan when you applied for more financial aid. Parent PLUS Loans can never be repaid under the PAYE plan. Perkins loans are eligible for the play if they’re consolidated.
REPAYE – Open to borrowers with Direct Loans, but not Parent PLUS Loans or consolidation loans that paid off Parent PLUS Loans. Perkins loans are eligible for the play if they’re consolidated.