Which income-driven plan has the lowest payment?

SAVE (Saving on a Valuable Education) has the lowest payment formula: 5% of discretionary income after a $15,000 deduction for single filers. For low-income borrowers, SAVE monthly payments can be as low as $0 (still required to file annually). PAYE is second-lowest at 10% of discretionary income.

Which plan has the shortest forgiveness timeline?

PAYE forgives loans after 20 years of qualifying payments. SAVE also forgives after 20 years for undergraduate loans and 25 years for graduate loans. IBR and ICR take 20-25 years depending on loan type and when you first borrowed.

Is forgiveness taxable income?

Yes. Forgiven loan amounts are treated as taxable income in the year of forgiveness. A $100,000 forgiveness triggers a tax bill on $100,000 of income. Planning for this is critical—work with a tax professional to understand your liability years in advance.

Can I switch between income-driven plans?

Yes. You can switch plans anytime by submitting a new Income-Driven Repayment Plan Request to your servicer. Your previous qualifying payments count toward forgiveness, so switching does not reset your timeline.

What happens if my income increases and I can't afford my payment?

Your monthly payment will increase on your plan recertification (annually). However, all income-driven plans cap your payment at the 10-year Standard Repayment amount. If your calculated payment exceeds what you'd pay over 10 years, your payment is capped at that level. You still qualify for forgiveness after the plan's timeline (20-25 years).

Income-Driven Repayment Plans Compared 2026 — SAVE vs PAYE vs IBR vs ICR

April 2, 2026 · CMBMV Staff

Four income-driven repayment (IDR) plans exist for federal student loans. Choosing the right plan can save you tens of thousands of dollars—or cost you tens of thousands if you pick wrong.

This guide compares all four plans head-to-head: payment formulas, forgiveness timelines, tax implications, and recommendations on which to choose.

The Four Income-Driven Plans at a Glance

Plan	Payment Formula	Forgiveness Timeline	Best For
SAVE	5% of discretionary income (plus $15,000 deduction for singles)	20 years (undergrad) / 25 years (grad)	Low-income borrowers, aggressive forgiveness seekers
PAYE	10% of discretionary income	20 years	Mid-income borrowers, fast forgiveness
IBR	10% or 15% discretionary income (varies by loan type)	20 or 25 years	Older borrowers, mixed loan types
ICR	Lowest of: 20-year standard payment or 12% of discretionary income	25 years	Borrowers with very high income relative to loans

SAVE Plan — The New Standard

Payment Formula

Monthly payment = 5% of discretionary income minus $15,000 annual deduction

Example: Borrower with $40,000 annual income, $120,000 loans. Discretionary income: $40,000 - $15,000 = $25,000. Monthly payment: (5% × $25,000) / 12 = $104.

For low-income borrowers, this often means $0 monthly payment. You still must file annually to recertify. Interest that accrues (but you don't pay) is forgiven if you stay on the plan.

Forgiveness Timelines

Undergraduate loans: 20 years of qualifying payments
Graduate loans: 25 years of qualifying payments
Interest accrual: Unpaid interest is forgiven, not compounded

Eligibility

All federal student loans except Parent PLUS loans. If you have Parent PLUS loans, consolidate them into a Direct Consolidation Loan to access SAVE.

Tax Implications on Forgiveness

Forgiven amounts are taxable income in the year of forgiveness. Budget accordingly or plan ahead.

SAVE is the best starting point for most borrowers in 2026. Lowest payments, interest forgiveness (critical benefit), and 20-year forgiveness for undergrads make it superior to PAYE and IBR for most cases. The only reason to choose a different plan is if your job offers PSLF (Public Service Loan Forgiveness) or your income structure makes another plan cheaper.

PAYE Plan (Pay As You Earn)

Payment Formula

Monthly payment = 10% of discretionary income

Example: Borrower with $50,000 annual income, $100,000 loans. Discretionary income: $50,000 - federal poverty line (varies by family size, roughly $15,000 for single). Monthly payment: (10% × $35,000) / 12 = $292.

Forgiveness Timeline

20 years of qualifying payments. Unpaid interest accrues and is added to remaining balance (not forgiven like SAVE).

Eligibility

Must be a "new borrower" as of Oct 1, 2007, and have borrowed after Oct 1, 2011. If you don't meet this, you're on IBR instead.

Tax Implications

Forgiven amounts are taxable income.

Why choose PAYE over SAVE? You probably shouldn't unless PAYE is the only available plan (some older borrowers are restricted to PAYE). SAVE is superior because it has lower payments (5% vs 10%), includes interest forgiveness, and reaches forgiveness in the same timeline.

IBR Plan (Income-Based Repayment)

Payment Formula

For new borrowers (after 2014): 10% of discretionary income, 20-year forgiveness

For older borrowers (before 2014): 15% of discretionary income, 25-year forgiveness

This is the default plan for borrowers who don't qualify for PAYE.

Tax Implications

Forgiven amounts are taxable income.

Why choose IBR? If you are an older borrower with loans before 2014, IBR may be your only option. For newer borrowers, SAVE is superior (lower payment percentage, interest forgiveness). IBR on its own is being phased out as SAVE becomes the default.

ICR Plan (Income-Contingent Repayment)

Payment Formula

Monthly payment = Lowest of: (A) your 10-year Standard Repayment amount, or (B) 12% of discretionary income

This plan is complex and rarely the best choice for most borrowers.

Forgiveness Timeline

25 years of qualifying payments. Forgiveness amount is taxable income.

Why choose ICR? Only if you have very high income relative to loan balance—essentially when 12% of discretionary income exceeds your 10-year payment. This is rare. Most high-income borrowers should just pay loans off in 10 years. ICR is the "fallback" plan when nothing else works.

Direct Comparison: Sample Scenarios

Scenario 1: Recent grad, $50,000 income, $150,000 loans

Plan	Monthly Payment	Forgiveness Timeline	Total Paid Before Forgiveness
SAVE	$191	20 years	$45,840 + interest accrued and forgiven
PAYE	$292	20 years	$70,080 + interest accrued to balance
IBR	$292	20 years	$70,080 + interest accrued to balance
Standard (10-year)	$1,545	10 years	$185,400

Winner: SAVE saves $24,240 in payments over 20 years and forgives accrued interest. Plus, if your income stays low, you might pay $0 for several years.

Scenario 2: Public service worker (PSLF eligible), $60,000 income, $200,000 loans

Plan	Monthly Payment	PSLF Forgiveness Timeline	Total Paid Before Forgiveness
SAVE	$228	10 years (120 qualifying payments)	$27,360
PAYE	$383	10 years (120 qualifying payments)	$45,960

Winner: SAVE still wins. Lower monthly payment means you pay less during the 10-year PSLF period. Remaining balance ($172,640) is forgiven tax-free under PSLF.

Key Decision Factors

1. Do you work in public service?

If yes: Choose SAVE (lowest payment during 10-year PSLF period). PSLF forgiveness is tax-free, so you don't owe taxes on forgiven amount. You want lowest payment to maximize what PSLF forgives.

If no: Choose SAVE or PAYE. Non-PSLF forgiveness is taxable, so you'll owe taxes on forgiven amount (e.g., $150,000 forgiveness = $150,000 taxable income).

2. How old are your loans?

If borrowed before 2014: You may be locked into IBR. SAVE eligibility is open to most, but confirm with your servicer.

If borrowed after 2014: SAVE or PAYE are available. SAVE is superior.

3. What is your income trajectory?

If income will stay low: SAVE's $15,000 deduction and 5% percentage is powerfully beneficial. You may pay $0 for years and still make progress toward forgiveness.

If income will grow significantly: Your payment will increase at recertification, but all plans cap at 10-year Standard Repayment. Your forgiveness timeline remains unchanged.

Frequently Asked Questions

What happens to unpaid interest on each plan?

SAVE: Interest that accrues but you don't pay is forgiven (huge benefit). PAYE/IBR/ICR: Unpaid interest is added to your remaining balance (you pay more in the long run). This is another major reason SAVE is superior.

Can I switch plans if my income changes dramatically?

Yes. You can switch plans anytime by submitting a new Income-Driven Repayment Plan Request. Your previous qualifying payments count toward forgiveness, so switching doesn't reset your timeline. If you lose your job or income drops, you can switch to SAVE immediately and potentially get $0 payments.

What if I ignore IDR and just pay the Standard 10-year plan instead?

You'll pay the loan off in 10 years with no forgiveness (because you paid it off). Monthly payments are higher but you never owe taxes on forgiveness. This strategy works if you have a high income and want the loan gone quickly.

How does tax forgiveness work on IDR forgiveness?

In the year you receive forgiveness (e.g., 2046 if you're in 20-year forgiveness now), the forgiven amount is reported as taxable income on your federal tax return. A $150,000 forgiveness = $150,000 additional taxable income = roughly $35,000-$50,000 tax bill depending on your tax bracket. Many borrowers work with CPAs to plan for this years in advance.

Is SAVE forgiveness really coming after 20 years?

SAVE was restarted after the Supreme Court blocked President Biden's broader forgiveness plan in 2023. SAVE is law. Forgiveness after 20-25 years is built into the plan. Political changes could theoretically affect this, but repayment plan law has bipartisan support (because it balances borrower relief with loan repayment). Plan on forgiveness happening, but consult a tax professional about your long-term strategy.