What is the best IDR plan in 2024?
For most undergraduate borrowers, SAVE is best. It uses only 5% of discretionary income (half of IBR/PAYE), excludes 225% of the poverty line (vs 150%), and includes an interest subsidy — if your payment doesn't cover monthly interest, the government covers the shortfall, preventing balance growth. Graduate borrowers pay 10% under SAVE — same as IBR/PAYE — but the interest subsidy still makes it preferable. The only exception: borrowers with older loans who don't qualify for SAVE may prefer IBR.
How is my IDR payment calculated?
All IDR plans use the same basic formula: (AGI − [poverty line × multiplier]) × plan percentage ÷ 12 = monthly payment. The differences are in the multiplier and percentage. SAVE example with $55,000 AGI, family of 1: Poverty line = $15,060. SAVE exclusion = 225% × $15,060 = $33,885. Discretionary income = $55,000 − $33,885 = $21,115. Monthly = $21,115 × 5% ÷ 12 = $88/month.
Can my IDR payment be $0?
Yes. If your AGI is below the poverty line multiplier for your plan, your payment is $0. For SAVE with family of 1: if AGI ≤ $33,885 (225% of $15,060), your payment is $0. You still make progress toward forgiveness on $0 payments. This is especially valuable in low-income years, unemployment, or early career stages. You must recertify income annually to maintain $0 payments.
Is IDR loan forgiveness taxable?
Currently, IDR forgiveness (after 20–25 years) is taxable as ordinary income in the year of forgiveness — a potential 'forgiveness bomb.' If you have $50,000 forgiven and are in the 22% bracket, you owe $11,000 in taxes. PSLF forgiveness (after 10 years) is permanently tax-free. The American Rescue Plan made all federal forgiveness tax-free through 2025, but Congress has not made this permanent. Plan for potential tax liability on IDR forgiveness. A financial planner can help with strategies like tax-loss harvesting or Roth conversions to prepare.
What is PSLF and how does it interact with IDR?
Public Service Loan Forgiveness cancels your remaining federal loan balance after 120 qualifying monthly payments (10 years) while working full-time for a qualifying government or nonprofit employer. To maximize PSLF: enroll in the lowest IDR payment plan (typically SAVE), make 120 payments, and have the remaining balance forgiven tax-free. PSLF is extraordinarily valuable for high-balance borrowers in public service — a doctor with $200,000 in loans working at a nonprofit hospital could have $150,000+ forgiven tax-free after 10 years of relatively low IDR payments.
How do I enroll in an IDR plan?
Apply at StudentAid.gov or through your loan servicer. You'll need to provide income documentation (usually your most recent tax return or pay stubs). Enrollment is free. IDR plans require annual recertification — you must submit updated income and family size each year. Missing recertification causes your payment to reset to the standard amount. Set a calendar reminder 60 days before your recertification deadline.