How does income-driven repayment work, and does it affect bankruptcy?

What is income-driven repayment?

It is a group of federal repayment plans, often shortened to IDR, that set the monthly payment by income and family size or number of dependents. The payment can go up or down as those change.1

You have to recertify your income and family size every year. Any balance left after the plan's repayment period, which is 20, 25 or 30 years depending on the plan, may be discharged.1

There is a trade-off. Federal Student Aid says these plans usually lower the payment, but lower payments or a longer repayment period will likely mean paying more interest over time. It also notes that under current IRS rules, you might have to pay income tax on an amount discharged at the end of the repayment period.1

Which plans exist now?

The lineup changed under the One Big Beautiful Bill Act, signed July 4, 2025, which created the Repayment Assistance Plan (RAP). This is the comparison Federal Student Aid showed on October 13, 2026.3 1

More change is scheduled. Federal Student Aid says the law eliminates ICR and PAYE no later than July 1, 2028.1

The SAVE plan is not on the list. On March 10, 2026 a federal court issued an order preventing the Department of Education from implementing it, and borrowers whose loans are in forbearance because of SAVE must select a new repayment plan.4

These figures are a snapshot. Use the Repayment Calculator on StudentAid.gov, or ask your servicer, for the plans and payment that apply to your loans.

Who can and cannot use these plans?

Eligibility depends on the loan type and on when you borrowed.5 1

• Borrowers with eligible loans taken out before July 1, 2026 can still enroll in IBR, ICR and PAYE.5 1
• A borrower who receives a new loan on or after July 1, 2026 loses eligibility for those plans and has access to RAP. A new consolidation loan counts as a new loan for this purpose.5 1
• Parent PLUS loans are not eligible for RAP.5 1
• Defaulted loans are not eligible for income-driven plans. Rehabilitation and consolidation are the main ways to get a loan out of default.6 1 7

You apply online on StudentAid.gov or with a paper form, and applying is free.1 8 9

How does it connect to loan forgiveness?

Besides the discharge of any balance left at the end of the repayment period, Public Service Loan Forgiveness runs through these plans: Federal Student Aid tells borrowers seeking it to repay under an income-driven plan. That program forgives the remaining balance on Direct Loans after the equivalent of 120 qualifying monthly payments (10 years) under an income-driven plan while working full-time for an eligible employer.1 5

How does an income-driven plan count in a bankruptcy discharge case?

A common worry is that the existence of a low payment plan defeats an undue hardship claim. The Justice Department's guidance for federal student loan cases does not treat it that way.2

• Applying for an income-driven plan is one of seven steps the guidance lists as evidence of good faith.2
• Taking part in a plan is evidence of good faith.2
• Not enrolling does not by itself show a lack of good faith. Government attorneys are expected to accept any reasonable explanation, such as being denied access to a plan, being steered into forbearance, or being given inaccurate information.2
• When the government tests whether you can pay now, the payment it generally uses for the comparison is the standard repayment plan amount, not the lower payment available under an income-driven plan.2

The guidance also records that the Consumer Financial Protection Bureau found borrowers wrongly denied enrollment in these plans and payments miscalculated. If you were refused or removed, that is worth describing with dates.2

The attestation form asks what you did to enroll in an income-driven program and, if you did not enroll, why. The bankruptcy judge makes the final decision, and courts are not bound by the government's position.10 2