Income-Driven Repayment (IDR) Plans

Student loans can be repaid in various ways depending on the client's situation. RightCapital allows users to input and propose four common student loan repayment plans. The standard repayment plan will use fixed payments to pay off the loan within ten years.

The four additional income-driven repayment plans (IBR, PAYE, SAVE, & RAP) are designed to make student loan debt more manageable by reducing monthly payments. Income-driven repayment (IDR) plans can lower monthly payments or provide relief when the outstanding federal student loan debt represents a significant portion of the client's annual income.

The plans may seem similar, but each has distinct pros and cons. If the client didn't choose a repayment plan, the loan servicer will have automatically placed them on the Standard repayment plan. Below you can find more details on each student loan repayment plan available in RightCapital:

Standard Repayment Plan

Repayment Plan	Eligible Loans	Monthly Payment and Time Frame	Eligibility and Other Information
Standard Repayment Plan	• Direct Subsidized and Unsubsidized Loans • Subsidized and Unsubsidized Federal Stafford Loans • All PLUS loans • All Consolidation Loans (Direct or FFEL)	Payments are fixed amounts that ensure your loans are paid off within 10 years (within 10 to 30 years for Consolidation Loans).	All borrowers are eligible for the plan. You'll usually pay less over time than under other plans. Standard Repayment Plan with a 10-year repayment period is not a good option for those seeking Public Service Loan Forgiveness (PSLF). Standard Repayment Plan for Consolidation Loans is not a qualifying repayment plan for PSLF.

Repayment Plan

Eligible Loans

Monthly Payment and Time Frame

Eligibility and Other Information

Standard Repayment Plan

• Direct Subsidized and Unsubsidized Loans

• Subsidized and Unsubsidized Federal Stafford Loans

• All PLUS loans

• All Consolidation Loans (Direct or FFEL)

Payments are fixed amounts that ensure your loans are paid off within 10 years (within 10 to 30 years for Consolidation Loans).

All borrowers are eligible for the plan.

You'll usually pay less over time than under other plans.

Standard Repayment Plan with a 10-year repayment period is not a good option for those seeking Public Service Loan Forgiveness (PSLF).

Standard Repayment Plan for Consolidation Loans is not a qualifying repayment plan for PSLF.

Income-Based Repayment Plan (IBR)

Repayment Plan	Eligible Loans	Monthly Payment and Time Frame	Eligibility and Other Information
Income-Based Repayment Plan (IBR)	• Direct Subsidized and Unsubsidized Loans • Subsidized and Unsubsidized Federal Stafford Loans • All PLUS loans made to students • Consolidation Loans (Direct or FFEL) that do not include Direct or FFEL PLUS loans made to parents	• Your monthly payments will be either 10 or 15 percent of discretionary income (depending on when you received your first loans), but never more than you would have paid under the 10-year Standard Repayment Plan. • Payments are recalculated yearly based on your updated income and family size. • You must update your income and family size each year, even if they haven't changed. • If you're married, your spouse's income or loan debt will be considered only if you file a joint tax return. • Any outstanding balance on your loan will be forgiven if you hadn't repaid your loan in full after 20 years or 25 years, depending on when you received your first loans. • You may have to pay income tax on any forgiven amount.	• You must have a high debt relative to your income. • Your monthly payment will never exceed the Standard 10-year Plan amount. • You'll usually pay more over time under the 10-year Standard plan. • You may have to pay income tax on any forgiven amount. • Good option for those seeking PSLF.

Repayment Plan

Eligible Loans

Monthly Payment and Time Frame

Eligibility and Other Information

Income-Based Repayment Plan (IBR)

• Direct Subsidized and Unsubsidized Loans

• Subsidized and Unsubsidized Federal Stafford Loans

• All PLUS loans made to students

• Consolidation Loans (Direct or FFEL) that do not include Direct or FFEL PLUS loans made to parents

• Your monthly payments will be either 10 or 15 percent of discretionary income (depending on when you received your first loans), but never more than you would have paid under the 10-year Standard Repayment Plan.

• Payments are recalculated yearly based on your updated income and family size.

• You must update your income and family size each year, even if they haven't changed.

• If you're married, your spouse's income or loan debt will be considered only if you file a joint tax return.

• Any outstanding balance on your loan will be forgiven if you hadn't repaid your loan in full after 20 years or 25 years, depending on when you received your first loans.

• You may have to pay income tax on any forgiven amount.

• You must have a high debt relative to your income.

• Your monthly payment will never exceed the Standard 10-year Plan amount.

• You'll usually pay more over time under the 10-year Standard plan.

• You may have to pay income tax on any forgiven amount.

• Good option for those seeking PSLF.

Pay As You Earn Repayment Plan (PAYE)

Important Update: No New Enrollments Under PAYE

As of 2024, the PAYE plan has been phased out. No new enrollments are being accepted for PAYE. Clients who were already enrolled in the PAYE plan before the phase-out date (July 1, 2024), can continue to stay on the PAYE plan until their student loans are paid.

Repayment Plan	Eligible Loans	Monthly Payment and Time Frame	Eligibility and Other Information
Pay As You Earn Repayment Plan (PAYE)	• Direct Subsidized and Unsubsidized Loans • Direct PLUS loans made to students • Direct Consolidation Loans that do not include PLUS loans (Direct or FFEL made to parents)	• Your monthly payments will be 10% of your discretionary income, but never more than you would have paid under the 10-year Standard Repayment Plan. • Payments are recalculated yearly based on your updated income and family size. • You must update your income and family size each year, even if they haven't changed. • If you're married, your spouse's income or loan debt will be considered only if you file a joint tax return. • Any outstanding balance on your loan will be forgiven if you haven't repaid your loan in full after 20 years.	• You must be a new borrower on or after Oct. 1, 2007, and must have received a disbursement of a Direct Loan on or after Oct. 1, 2011. • You must have high debt relative to your income. • Your monthly payment will never exceed the Standard 10-year Plan amount. • You'll usually pay more over time than under the 10-year Standard Plan. • You may have to pay income tax on any amount that is forgiven. • Good option for those seeking PSLF.

Repayment Plan

Eligible Loans

Monthly Payment and Time Frame

Eligibility and Other Information

Pay As You Earn Repayment Plan (PAYE)

• Direct Subsidized and Unsubsidized Loans

• Direct PLUS loans made to students

• Direct Consolidation Loans that do not include PLUS loans (Direct or FFEL made to parents)

• Your monthly payments will be 10% of your discretionary income, but never more than you would have paid under the 10-year Standard Repayment Plan.

• Payments are recalculated yearly based on your updated income and family size.

• You must update your income and family size each year, even if they haven't changed.

• If you're married, your spouse's income or loan debt will be considered only if you file a joint tax return.

• Any outstanding balance on your loan will be forgiven if you haven't repaid your loan in full after 20 years.

• You must be a new borrower on or after Oct. 1, 2007, and must have received a disbursement of a Direct Loan on or after Oct. 1, 2011.

• You must have high debt relative to your income.

• Your monthly payment will never exceed the Standard 10-year Plan amount.

• You'll usually pay more over time than under the 10-year Standard Plan.

• You may have to pay income tax on any amount that is forgiven.

• Good option for those seeking PSLF.

Saving On A Valuable Education (SAVE)

Important Update: SAVE Phase Out

Borrowers enrolled in the SAVE plan will need to enroll in a new repayment plan within 90 days of July 1st, 2026.

Repayment Plan	Eligible Loans	Monthly Payment and Time Frame	Eligibility and Other Information
Saving On A Valuable Education (SAVE)	• Direct Subsidized and Unsubsidized Loans • Direct PLUS loans made to students • Direct Consolidation Loans that do not include PLUS loans (Direct or FFEL made to parents)	• Your monthly payments will be 5% of discretionary income for undergraduate loans, 10% for graduate loans, and a weighted average for borrowers with both. • For SAVE, the income exemption (used to calculate discretionary income) is increased to 225% of the poverty line, compared to the 150% used for IBR and PAYE. • Payments are recalculated yearly based on your updated income and family size. • You must update your income and family size each year, even if they haven't changed. • Any outstanding balance on your loan will be forgiven if you haven't repaid your loan in full after 20 years (if all loans were taken out for undergraduate study) or 25 years (if any loans were taken out for graduate or professional study).	• Any Direct Loan borrower with an eligible loan type may choose this plan. • You'll usually pay more over time than under the 10-year Standard Plan. • You may have to pay income tax on any amount that is forgiven • Good option for those seeking PSLF.

Repayment Plan

Eligible Loans

Monthly Payment and Time Frame

Eligibility and Other Information

Saving On A Valuable Education (SAVE)

• Direct Subsidized and Unsubsidized Loans

• Direct PLUS loans made to students

• Direct Consolidation Loans that do not include PLUS loans (Direct or FFEL made to parents)

• Your monthly payments will be 5% of discretionary income for undergraduate loans, 10% for graduate loans, and a weighted average for borrowers with both.

• For SAVE, the income exemption (used to calculate discretionary income) is increased to 225% of the poverty line, compared to the 150% used for IBR and PAYE.

• Payments are recalculated yearly based on your updated income and family size.

• You must update your income and family size each year, even if they haven't changed.

• Any outstanding balance on your loan will be forgiven if you haven't repaid your loan in full after 20 years (if all loans were taken out for undergraduate study) or 25 years (if any loans were taken out for graduate or professional study).

• Any Direct Loan borrower with an eligible loan type may choose this plan.

• You'll usually pay more over time than under the 10-year Standard Plan.

• You may have to pay income tax on any amount that is forgiven

• Good option for those seeking PSLF.

Repayment Assistance Plan (RAP)

Repayment Plan	Eligible Loans	Monthly Payment and Time Frame	Eligibility and Other Information
Pay Repayment Assistance Plan (RAP)	• Direct Subsidized and Unsubsidized Loans • Direct PLUS loans made to students • Direct Consolidation Loans that do not include PLUS loans (Direct or FFEL made to parents)	• A percentage of your adjusted gross income (AGI) up to 10%, divided by 12 • Payments are recalculated yearly based on your updated income and family size. • You must update your income and family size each year, even if they haven't changed. • If you're married, your spouse's income or loan debt will be considered only if you file a joint tax return. • Any outstanding balance on your loan will be forgiven if you haven't repaid your loan in full after 30 years.	• You must be a new borrower on or after July 1, 2026 • You must have high debt relative to your income. • Your monthly payment will never exceed the Standard 10-year Plan amount. • You'll usually pay more over time than under the 10-year Standard Plan. • You may have to pay income tax on any amount that is forgiven. • If the monthly payment on RAP is less than the monthly interest accrual, the interest unpaid after making the monthly payment for that month will be subsidized. • Good option for those seeking PSLF.

Repayment Plan

Eligible Loans

Monthly Payment and Time Frame

Eligibility and Other Information

Pay Repayment Assistance Plan (RAP)

• Direct Subsidized and Unsubsidized Loans

• Direct PLUS loans made to students

• Direct Consolidation Loans that do not include PLUS loans (Direct or FFEL made to parents)

• A percentage of your adjusted gross income (AGI) up to 10%, divided by 12

• Payments are recalculated yearly based on your updated income and family size.

• You must update your income and family size each year, even if they haven't changed.

• If you're married, your spouse's income or loan debt will be considered only if you file a joint tax return.

• Any outstanding balance on your loan will be forgiven if you haven't repaid your loan in full after 30 years.

• You must be a new borrower on or after July 1, 2026

• You must have high debt relative to your income.

• Your monthly payment will never exceed the Standard 10-year Plan amount.

• You'll usually pay more over time than under the 10-year Standard Plan.

• You may have to pay income tax on any amount that is forgiven.

• If the monthly payment on RAP is less than the monthly interest accrual, the interest unpaid after making the monthly payment for that month will be subsidized.

• Good option for those seeking PSLF.

IDR Payment Calculation

The following table illustrates how income-driven student loan payments are generated within RightCapital. The client's discretionary income is calculated by taking their previous year's AGI from their 1040 Taxes and Fees card and subtracting 225% of the poverty guideline amount based on their family size and residence state.

Plan	Monthly Payment	Term
IBR - (Originated after 7/1/2014)	10% of discretionary income, capped at 10 yr standard repayment plan	20
IBR - (Originated before 7/1/2014)	15% of discretionary income, capped at 10 yr standard repayment plan amount	25
PAYE	10% of discretionary income, capped at 10 yr standard repayment plan amount	20
SAVE	5% of discretionary income* for undergraduate loans, 10% for graduate loans. No payment cap. *income exemption (used to calculate discretionary income) increased to 225%	20 for all undergraduate loans 25 for all graduate loans
RAP	A percentage of adjusted gross income (AGI) up to 10%, divided by 12	30

Taxation on Loan Forgiveness

Income-driven repayment plan forgiveness: When a student loan in on an income-driven repayment plan, such as IBR, PAYE, SAVE, or RAP, the loan balance is forgiven at the end of the term, usually 20-30 years. The loan balance forgiven is taxable. See the chart below for a summary of each IDR plan's forgiveness terms and taxation:

Loan Type	Taxation
IBR	Any outstanding balance on your loan will be forgiven if you haven't repaid your loan in full after 20 years when using IBR. RightCapital will include ordinary income tax for any amount that is forgiven within the financial plan.
PAYE	Any outstanding balance on your loan will be forgiven if you haven't repaid your loan in full after 20 years when using PAYE. RightCapital will include ordinary income tax for any amount that is forgiven within the financial plan.
SAVE	Any outstanding balance on the client's loan will be forgiven if it hasn't been repaid fully after 20 years (undergraduate) or 25 years (graduate) when using SAVE. RightCapital will include ordinary income tax for any amount that is forgiven within the financial plan.
RAP	Any outstanding balance on the client's loan will be forgiven if it hasn't been repaid fully after 30 years when using RAP. RightCapital will include ordinary income tax for any amount that is forgiven within the financial plan.