Income-Driven Repayment Plans Explained: Which One Saves You the Most

Four income-driven repayment plans exist for federal student loans. Choosing the wrong one could cost you thousands. Here's how they compare.

The Plans

SAVE (Saving on a Valuable Education): Newest plan. Payments = 5% of discretionary income for undergrad, 10% for grad. Forgiveness after 20/25 years. Best for most borrowers.

PAYE (Pay As You Earn): 10% of discretionary income. Forgiveness at 20 years. Good for borrowers who took loans after 2011.

IBR (Income-Based Repayment): 10-15% of discretionary income. Forgiveness at 20-25 years. Default option for many borrowers.

ICR (Income-Contingent Repayment): 20% of discretionary income. Forgiveness at 25 years. Only option for Parent PLUS loans (via consolidation).

How to Choose

• Most borrowers: SAVE plan (lowest payments)
• Pursuing PSLF: SAVE or PAYE (lowest payments = most forgiven)
• Parent PLUS loans: ICR after consolidation into Direct loan