Types of Income-Driven Repayment Plans for Your Career

The federal government offers different types of income-driven repayment (IDR) plans for qualifying federal student loan borrowers. Each plan type is based on a unique formula that calculates your monthly payment amount based on a percentage of your income and other socio-economic circumstances, such as your family size. This can reduce your monthly payment below what you would pay under the Standard Repayment Plan.

Typically, federal borrowers from a wide range of educational backgrounds and career types find they qualify for more than one plan. Determining which one to choose requires reading the fine print, and will depend on many factors such as your income level, marital filing status, children, possible career trajectory, and tax implications.

While each type of IDR plan comes with its own pros and cons to consider, it can also be helpful to see different career examples as part of your decision-making process. Let’s take a look at IDR for borrowers in a few different professional career types and stages.

Typically, federal borrowers from a wide range of educational backgrounds and career types find they qualify for more than one plan. Determining which one to choose requires reading the fine print, and will depend on many factors such as your income level, marital filing status, children, possible career trajectory, and tax implications.

While each type of IDR plan comes with its own pros and cons to consider, it can also be helpful to see different career examples as part of your decision-making process. Let’s take a look at IDR for borrowers in a few different professional career types and stages.

PAYE vs. REPAYE

Two of the more historically popular IDR plans for professionals were Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE), the latter of which is being replaced by a new plan called Saving on A Valuable Education (SAVE) as of 2023.

Compare the rules of these two plans in the table below, and for the most up-to-date details on these two plans, go to the Federal Student Aid website at studentaid.gov/.

IDR Comparison Chart

The PAYE plan capped monthly payments at 10% of discretionary income and offeed forgiveness after 20 years of payment. This plan could have been a good option if you had a more moderate income and higher debt-to-income (DTI) ratio, as the lower capped monthly payment could help you manage your loan debt better. PAYE was only available to borrowers who did not have loans prior to October 1, 2007, and who did have loans on or after October 1, 2011. Additionally, PAYE had a partial financial eligibility requirement. This meant that the annual amount due on your eligible loans, as calculated under a 10-year Standard Repayment Plan, had to exceed the difference between your adjusted gross income and 150% of the poverty line for your family size in the state you resided in.

The original REPAYE plan, which became available on December 17, 2015, also capped monthly payments at 10% of discretionary income. However, this plan made a distinction between undergraduate and graduate student loan debt. For borrowers who never took out any graduate student loans, this plan offered forgiveness after 20 years of payment. For borrowers that did have graduate student loans, the plan offered forgiveness after 25 years of payment. If you weren’t eligible for PAYE or only took out undergraduate loans, then REPAYE could have been a good option for you. However, for married borrowers, this plan did include your spouse’s income in its calculation, regardless of whether you filed jointly or separately.

Income-Driven Repayment plans for doctors

For a doctor, IDR can be a financial lifeline, especially at the start of a medical career when student loan debt is at its highest – the average medical school graduate in 2023 is saddled with more than total student loan debt. IDR plans can help keep your monthly student loan payment to an amount that is affordable based on your income and family size. See our Guide to Student Loan Repayment Programs for more details.

IDR for residents

When you’re starting out as a resident, you can enroll in an IDR plan to help manage your monthly federal student loan payments regardless of whether you’re working in the public or private sector.

Enrolling in one of the four IDR plans will stabilize your monthly payments, and also put you on the path to potential forgiveness in 10, 20, or 25 years depending on which plan you choose. And once you choose a plan, you’re not necessarily stuck in it. You have the option to switch into a different plan – including the Standard Repayment Plan – when your income or family situation changes.

Residency is also a good time to consider the Public Service Loan Forgiveness (PSLF)¹ program, which requires enrollment in one of the four IDR plans anyway. You could be eligible for PSLF if you’re employed by a qualifying nonprofit organization or a government entity, such as a state or federal hospital. On the PSLF track, you could reach a potential forgiveness event much faster – 10 years vs. 20 or 25 years if you’re enrolled in IDR. Learn more here.

IDR for dentists

In 2022, the average dental school graduate left school with more than $293,000 in student loan debt. Plus, many must borrow more after earning their DDS or DMD for tuition and fees during residency or postgraduate specialty training. An IDR plan could help ease that burden.

As for PSLF, this option can be harder to pursue for dentists because they typically do not have as much access to government or nonprofit employment as physicians. While many physicians’ residencies and fellowships can be done at hospitals that count as qualifying employers within the PSLF program, many dentists work in private practice. So, even though dental graduates have higher student loan debt on average compared to medical school graduates, they’re options for employment that would meet eligibility requirements for PSLF are more limited.

IDR for private medical practice

While you don’t qualify for PSLF as a private practice physician or dentist, you can still be eligible for the manageable monthly payment structure – and eventual forgiveness – that’s made possible through enrollment in an IDR plan. Just make sure you do your due diligence, especially as your salary increases during your career, as it’s possible for your monthly payment amount could increase.

However, depending on how much student loan debt you have and the tax implications, it may make more financial sense for you to pay off your loans sooner than the structured timeframe in an IDR plan. Learn more in our Guide to Student Loan Repayment.

IDR for lawyers

According to the American Bar Association, the average law school graduate has $165,000 in educational debt when they graduate, and more than 95% of law students need to take out loans to attend law school.

Lawyers could be eligible for PSLF if they work within the government or a qualifying nonprofit providing public interest law services. Studentaid.gov defines public interest law as “legal services provided by an organization that is funded in whole or in part by a US federal, state, local, or tribal government.” Public defenders, prosecutors, and legal aid attorneys are examples of jobs for attorneys that could qualify for PSLF.

However, if you’re an attorney in private practice, you could still be eligible for federal student forgiveness through IDR, as well as many state-level loan forgiveness and repayment programs for public interest lawyers, according to the American Bar Association.

Learn more about how to apply for federal IDR plans here, and contact a student loan specialist at GradFin² for help determining which plan is right for you.

IDR for teachers

Teachers have several paths to potential forgiveness available to them. PSLF can be a good option for teachers, especially if you have a large amount of debt. Most private elementary and secondary schools, and private colleges and universities, are not-for-profit organizations that would count as qualifying employment under the PSLF program. If you’re employed at a private, for-profit school or other private sector organization, you could still pursue forgiveness through IDR. If you have a smaller amount of federal student loan debt, a faster forgiveness track through Teacher Loan Forgiveness may make more sense.

IDR tax implications

At the federal level, taxation on student loan forgiveness is currently suspended due to a provision of the American Rescue Plan. However, after that provision expires on December 31, 2025, and forgiveness events will be subject to tax again. That means if you receive forgiveness in 2026 or beyond, the IRS could expect a balloon tax payment. And for many advanced degree professionals, this tax payment could be tens or hundreds of thousands of dollars.

Additionally, tax rules in the state you reside could potentially play a major role in which IDR plan you ultimately decide on. While most states have laws or policies that follow the federal tax treatment of debt forgiveness or cancellation events, some state tax laws vary.

For married borrowers, the distinction of married and tax filing status is important for IDR plans and varies for each one. Your spouse’s income and how much student loan debt they have could be important factors in which plan you choose. Always consult your own tax or accounting advisor for specific guidance.

Is an Income-Driven Repayment plan right for you?

Understanding if IDR is right for you and which plan to choose ultimately comes down to the question: Do you want to minimize total repayment cost, or do you want to minimize monthly payments?

While IDR generally comes with pros such as lower monthly payments (or potentially $0 per month) and potential loan forgiveness, it’s not for everyone – especially if you prioritize minimizing your total repayment over minimizing monthly payments. For example, if you’re a high earner or your student loan amount is low enough that it’s manageable for your budget, then the 10-year Standard Repayment Plan route may make more financial sense. And depending on how much student loan debt you have, your future forgiveness event could be end up being costly in taxes, which you’ll need to factor into your decision-making process too.

To learn more about individual IDR plans, which one would be best-suited for your financial needs, and how to apply, contact our student loan specialists at GradFin for a free 30-minute phone consultation and analysis of your student loans. Our student loan specialists can help you understand the details of each IDR plan and can find the right plan for you based on your unique financial profile. Schedule a free consultation to discuss IDR and other repayment options and determine which plan is right for your student loans and career path.