Why many graduates opt for income-driven repayment plans


It’s no secret that tuition costs in the US keep rising each year, forcing many students to take out federal and private student loans to afford college. While student loans are categorized as good debt, many graduates default because they select the wrong repayment plans.

If you’re a recent graduate looking for an effective repayment plan, here’s why you should consider an income-driven repayment plan (IDR).

So, what is an IDR plan?

Under this plan, you make payments based on your family size and discretionary income instead of the amount you owe. It aims to make payments affordable for graduates, especially those whose starting salaries are low.

Many graduates opt for IDR plans because:

• Lower monthly payments: your minimum monthly payment can range from 10 to 20% of your discretionary income, but this depends on the plan you choose. This way, you can free up more money for other expenses.
• Flexible monthly payments: with this plan, your monthly payments adjust to your income.
• Avoid default: since your monthly payments are low, you can stay on track with your student loan payments and avoid default.
• Loan forgiveness: consistent payments for 20 to 25 years keep you on track for student loan forgiveness.

There are four main types of IDR plans, and they include:

1. Revised Pay As You Earn (REPAYE)

Anyone with student loans is eligible for the REPAYE plan, where your monthly payments are 10% of your discretionary income. And, after 20 years of consistent payments, you can qualify for loan forgiveness.

2. Income-based repayment (IBR)

This is the most popular form of income-driven repayment plan because it has the lowest monthly payment. Depending on when you took out your first loan, your monthly payment is 10 or 15% of your discretionary income.


Although qualifying for PAYE can be challenging, it’s a generous income-driven repayment plan, providing monthly payments of 10% of your income.

4. ICR 

ICR is the least generous repayment plan, as your monthly payments can go up to 20% of your discretionary income.

Contact StudentLoanify today for more information about income-driven repayment plans.