Type of Plan

Plan Description

Pay as You Earn (PAYE)

The plan provides borrowers to make maximum monthly payments equal to 10% of disposable income for 20 years, and the remaining balances are written off. The program allows the government to make interest payments for up to three years to prevent the remaining amount from increasing even if the interest accrued exceeds monthly payments. Internal Revenue Service (IRS) treats forgiven balances as taxable income.

Revised Pay as You Earn (REPAYE)

The plan allows borrowers to make payments equal to 10% of income after paying taxes each month. The program also caps payments not to exceed the 10-year standard repayment plan amount. The remaining amount is written-off after 20 years for undergraduate loans and 25 years for graduate loans. The government pays interest benefits that limit the remaining increases during the repayment period even if the interest accrued exceeds monthly payments. The IRS recognizes forgiven credits as taxable income.

Income-Based Repayment (IBR)

Each month, under this plan, payments are capped at 10% of disposable earnings for fresh loan borrowers after July 1, 2014. After July 1, 2014, the balances for new borrowers are forgiven after 20 years and 25 years for previous borrowers. All payments are capped at 15% of disposable income. The federal government pays interest benefits for up to three years to avoid the outstanding balances increasing regardless of more expensive accrued interest than the monthly payments. The IRS then treats the balances as taxable incomes.

Income-Contingent Repayment (ICR)

The plan allows borrowers to pay either the lesser of 20% of disposable earnings or what the borrowers would spend on a 12-year repayment plan that adjusts according to changes in the borrowers’ earning levels. The outstanding debt is then forgiven after 25 years, and IRS treats balances as taxable incomes.

Public Service Loan Forgiveness (PSLF)

The plan provides loan discharge for government and nonprofit workers after ten years (120 monthly payments). The loan balances are forgiven and not treated by the IRS as taxable incomes.