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Income-Driven Repayment
Definition
Student loan repayment plans where monthly payments are based on income and family size.
Explanation
IDR plans calculate payments as a percentage of discretionary income, making them affordable for borrowers with high debt relative to income. Four main plans exist: PAYE, REPAYE/SAVE, IBR, and ICR. Payments adjust annually based on income recertification.
IDR plans provide forgiveness of remaining balances after 20-25 years of qualifying payments. They are ideal for borrowers pursuing PSLF or those with high debt-to-income ratios.
Example
A teacher earning $45,000 with $60,000 in student loans: standard payment is $600/month but IDR payment is only $250/month.