Issue Brief: The Winding Road of Income-Driven Repayment

Federal income-driven repayment (IDR) plans, which tie a borrower’s monthly payment amount to their income and forgive the balance of the debt after a set number of years, were created to help low-income borrowers better manage repayment and avoid default. Rather than a fixed or graduated repayment plan paid off over a decade, borrowers can choose from one of five different IDR plans that are based on their annual income and family size and repay the loan over 20 to 25 years, depending on the plan and whether the borrower attended graduate school. Each plan is briefly detailed in this brief.