Department Of Education Reopens PAYE And ICR Plans

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The Department of Education announced Wednesday that it was reopening two retired income-driven repayment plans, the Pay As You Earn (PAYE) plan and Income-Contingent Repayment (ICR) plan. The plans will stay open until July 1, 2027, as an alternative to the Saving on A Valuable Education (SAVE) plan. The SAVE plan is the newest and most generous federal loan repayment plan, but it’s been tied up in litigation since summer.

Borrowers enrolled in SAVE are on an extended payment pause. During this forbearance, payments aren’t required, and interest doesn’t accrue. However, these months don’t count toward the requirements for certain forgiveness programs, such as Public Service Loan Forgiveness (PSLF). Borrowers enrolling in a new plan will need to resume payments, but these payments will count toward forgiveness requirements. It’s important to understand, though, that student loan forgiveness is also currently blocked under PAYE and ICR.

What student loan repayment plans are available?

Created in 2012 and 1996, these two income-driven repayment plans were originally phased out in the summer of 2024 and replaced with the SAVE. Compared to the SAVE plan, the other two available options will cost most borrowers more each month.

Pay As You Earn (PAYE)

The PAYE plan bases your monthly federal student loan payments on 10 percent of your discretionary income. Under this plan, discretionary income is defined as the difference between your annual income and 150 percent of the poverty guideline. Compared to ICR, PAYE will give most borrowers a lower monthly payment. Up to the first $22,590 of income, single borrowers do not pay anything. They’ll pay 10 percent of any discretionary income above that amount.

Income-Driven Repayment (ICR)

The ICR plan can help lower your federal student loan payment to either 20 percent of your discretionary income or the amount you would pay for 12 years on a fixed repayment plan — whichever is less. Under ICR, your discretionary income is the difference between your annual income and 100 percent of the poverty guideline. Up to the first $15,060 of income, single borrowers pay $0. They’ll pay 20 percent of any income above that amount.

In other words, with ICR, more of your income is considered “discretionary” and you’ll also owe a larger share of it.

The ICR plan is also the only repayment plan available to Parent PLUS borrowers (after consolidating into a Direct Consolidation loan).

Saving on A Valuable Education (SAVE)

Under the SAVE plan, you pay as little as 5 percent of your discretionary income. This plan defines discretionary income the most generously of the three: it’s the difference between your annual income and 225 percent of the poverty guideline. Up to the first $32,800 of income, single borrowers pay $0. They’ll pay 5 percent to 10 percent of any income above that amount, based on their original balances.

Compare your repayment plan options

All three options are types of income-driven repayment plan (IDR). Remember that each defines discretionary income differently, which will impact your monthly payment’s size.

Should I enroll in a different student loan repayment plan?

Borrowers can stay on the SAVE plan and on the extended payment pause for now. However, many experts predict that incoming President Donald Trump will eliminate the SAVE plan once he takes office or, at the very least, drop support for the pending lawsuits. Even if you don’t choose to enroll in a different program, it’s best to research your options in case you must in the future.

If you’re able to make your student loan payments and want to earn credit toward student loan forgiveness, you may want to consider enrolling in a different payment plan, especially if you’re close to meeting the requirements. For Public Service Loan Forgiveness, you must make 120 qualifying payments before you can get the remainder of your loans forgiven.

During a recent interview, leading student loan expert Mark Kantrowitz explained that borrowers who stay in the SAVE plan aren’t losing money, but they are losing time. To gain back that time, he says borrowers who are close to receiving forgiveness may want to look into other income-driven repayment plans, even though the monthly payments may increase.

Borrowers who wish to stay on the SAVE plan but gain credit towards PSLF have one other option. Through the Department of Education’s PSLF Buy Back program, borrowers may “buy back” months of credit. To do so, they must submit a request and make a payment equal to their monthly payment times the number of months for which they want credit. Imagine your loan was in forbearance for two months. If your monthly payment was $150, and you want to buy back those two months, you would need to pay $300.

How do I enroll in the PAYE or ICR plan?

Borrowers who are not enrolled in an IDR plan or those interested in enrolling in a different plan can apply at studentaid.gov/idr. To fill out the application, you’ll need:

• Your studentaid.gov account information.
• A verified FSA ID.
• Your financial information, including your tax return.
• Personal information, including your contact information.
• Your spouse’s information, if applicable.
• About 10 minutes time to fill out your application.

According to the Department of Education, borrowers may be placed on forbearance for up to 60 days while their servicer processes their application. During this time, no payment is due and interest will not accrue, but — unlike the SAVE forbearance — the time will count toward forgiveness.