Proposed Regulatory Text with Edits for Issue Paper #10: Income-driven Repayment Plans 

§ 685.209 Income-driven repayment plans. 

(a) General. Income-driven repayment (IDR) plans are plans that are intended to keep payments 

affordable to borrowers by basing payments on income and family size instead of loan debt and interest 

rate. There are 5 IDR plans: 

(1) The Income-Contingent Repayment (ICR) Plan; 

(2) The Income-Based Repayment (IBR) Plan; 

(3) The Pay As You Earn (PAYE) Repayment Plan; 

(4) The Revised Pay As You Earn (REPAYE) Repayment Plan; and 

(5) The Expanded Income-Contingent Repayment (EICR) Plan. 

(b) Definitions. 

(1) Other definitions TK 

(2) Partial Financial Hardship means a circumstance in which the amount a borrower (and, as 

applicable, the borrower’s spouse) would pay on the 10-year standard repayment plan on 

eligible loans for the purposes of proration is more than what the borrower would pay on the 

IBR or PAYE Plan as determined under subsection (e). To determine whether the borrower has a 

partial financial hardship, the Secretary uses the greater of the balances that were outstanding 

on the borrower's eligible loans at the time the borrower entered repayment on the loans or the 

balances on those loans that were outstanding at the time the borrower requested to enter the 

IBR or PAYE Plan and takes a spouse’s income and loan debt into consideration consistent with 

subsection (d). 

(3) Eligible new borrower means for the purpose of the PAYE Plan means an individual who -

(A) Has no outstanding balance on a Direct Loan Program loan or a FFEL Program loan as 

of October 1, 2007, or who has no outstanding balance on such a loan on the date he or 

she receives a new loan after October 1, 2007; and 

(B) Receives a disbursement of a Direct Subsidized Loan, Direct Unsubsidized Loan, 

student Direct PLUS Loan, or a Direct Consolidation Loan on or after October 1, 2011. 

(4) New borrower means for the purposes of the IBR Plan means an individual who has no 

outstanding balance on a Direct Loan Program or FFEL Program loan on July 1, 2014, or who has 

no outstanding balance on such a loan on the date he or she obtains a loan after July 1, 2014. 

(5) Eligible loans for the purposes of proration means loans under subsection (d) as well as FFEL 

Stafford Loans, FFEL PLUS Loans made to graduate/professional students, and FFEL 

Consolidation Loans that did not repay a FFEL, or Direct PLUS Loan made to a parent borrower. 

(6) Discretionary income means for the ICR plan, the difference between the applicable total 

income determined in accordance with subsections (e) and (l) and 100 percent of the applicable 

poverty guideline; for the IBR, PAYE, and REPAYE , and EICR plans, it means the difference 

between the applicable total income and 150% of the applicable poverty guideline or $0, 

whichever is greater; for the EICR plan, it means the difference between the applicable total 

income and 400% of the applicable poverty guideline or $0 whichever is greater. 

(7) Family size means the number of individuals that is determined by summing: 

(A) For all IDR plans, the borrower; 

(B) For the ICR, IBR, and PAYE plans, the borrower's spouse 

(C) For the REPAYE plan, the borrower’s spouse, but only if the spouse’s income is 

included in the calculation of the borrower’s monthly payment amount under 

subsection (e); 

(D) For all IDR plans, the borrower’s children, including unborn children who will be born

during the year the borrower certifies family size, if the children receive more than half 

their support from the borrower; and 

(E) For all IDR plans, other individuals if, at the time the borrower certifies family size, 
 

 

 

 

the other individuals live with the borrower and receive more than half their support 

from the borrower and will continue to receive this support from the borrower for the 

year for which the borrower certifies family size. 

(8) Support includes money, gifts, loans, housing, food, clothes, car, medical and dental care, 

and payment of college costs. 

(9) Poverty guideline refers to the income categorized by State and family size in the poverty 

guidelines published annually by the United States Department of Health and Human Services 

pursuant to 42 U.S.C. 9902(2). If a borrower is not a resident of a State identified in the poverty 

guidelines, the poverty guideline to be used for the borrower is the poverty guideline (for the 

relevant family size) used for the 48 contiguous States. 

(c) Borrower eligibility. 

(1) Borrowers are eligible for the ICR, REPAYE, and EICR plans if they have eligible loans; 

(2) Borrowers are eligible for the IBR Plan if they have eligible loans and have a partial financial 

hardship when they initially enter the plan; and 

(3) Borrowers are eligible for the PAYE Plan if they have eligible loans, are an eligible new 

borrower, and have a partial financial hardship when they initially enter the plan. 

(d) Loans eligible to be repaid under an IDR plan. 

(1) For ICR, IBR, PAYE, and REPAYE plans, eligible loans are Direct Subsidized Loans, Direct 

Unsubsidized Loans, Direct PLUS Loans for graduate/professional borrowers, and, except for the 

ICR plan, Direct Consolidation Loans that did not repay a Direct or FFEL PLUS Loan for parents; 

(2) For the ICR plan, eligible loans also include Direct Consolidation Loans that repaid a Direct or 

FFEL PLUS Loans for parents; 

(3) For the EICR plan, eligible loans are TK. 

(e) Treatment of married borrowers. (1) Income. Unless a married borrower certifies that the borrower 

is separated from the borrower’s spouse or unable to reasonably access the spouse’s income, a spouse’s 

income is included in the calculation of the borrower’s monthly payment amount for the tax year of the 

income the Secretary uses to calculate the borrower’s monthly payment under the following conditions:

(A) For the ICR Plan, if the borrower and spouse file a joint Federal income tax return or 

the borrower and spouse elect to repay their Direct Loans jointly under the ICR plan; 

(B) For the IBR, or PAYE, or EICR plans, if the borrower and spouse file a joint Federal 

income tax return; and 

(C) For the REPAYE plan, regardless of whether the borrower and spouse file a joint 

Federal income tax return. 

(2) Loan debt. 

(A) For the IBR, PAYE, REPAYE, and EICR plans, the spouse’s eligible loan debt for the 

purposes of adjusting the payment amount and to perform the calculation as described 

in subsection (g), is included in the calculation of the borrower’s monthly payment 

amount if the spouse’s income is included in the calculation of the borrower’s monthly

payment amount. 

(B) For the ICR plan, the spouse’s loans meeting the criteria of paragraph (d)(2) of this 

section are only included in the calculation of the borrower’s monthly payment amount 

if the borrower elects to repay the borrower’s eligible Federal student loans jointly

under the ICR plan. 

(f) Setting payment amounts. 

(1) For the ICR Plan, payments are the lesser of: 

(A) What the borrower would have paid under a repayment plan that is based on a 12-

year repayment plan and that has fixed payments, based on the amount that borrower 
 

 

owed when the loan entered the ICR plan multiplied by a percentage based on income 

established by the Secretary in a Federal Register notice updated annually to account 

for inflation; or 

(B) 20% of discretionary income, divided by 12. 

(2) For those who are not new borrowers under the IBR Plan, payments are the lesser of: 

(A) 15 percent of discretionary income, divided by 12; or 

(B) What the borrower would have paid on a 10-year standard repayment plan based on 

the loan balance and interest rate that were applicable to the loans at the time the 

borrower entered the IBR Plan. 

(3) For new borrowers under the IBR Plan and for all borrowers on the PAYE Plan, payments are 

the lesser of: 

(A) 10 percent of discretionary income, divided by 12; or 

(B) What the borrower would have paid on a 10-year standard repayment plan based on 

the loan balance and interest rate that were applicable to the loans at the time the 

borrower entered the IBR or PAYE plans. 

(4) For the REPAYE Plan, payments are 10 percent of discretionary income, divided by 12. 

(5) For the EICR Plan: 

(A) Payments are TK percent of discretionary income, divided by 12; 

(B) A Direct Subsidized Loan or Direct Subsidized Consolidation Loan borrower who 

meets the requirements described in paragraphs (b), (d), (e), (f), (g), (h), (i), or (j) of § 

685.204 shall have a $0 payment under this section. 

(C) If the borrower is a spouse of an Active Duty service member, they will have a $0 

monthly payment for 6 months after their spouse has received orders for a permanent 

change of duty station or active duty orders for longer than 180 days 

i) the borrower will document they are a spouse of an active duty service 

member by submitting a copy of proof of enrollment in the Defense Enrollment 

Eligibility Reporting System 

ii) the borrower will document their spouse has received orders for a permanent 

change duty station by submitting a copy of those orders. 

(D) A borrower will have a $0 monthly payment for 6 months, unless otherwise 

specified, 

(i) Because of the birth of a son or daughter of the borrower and in order to care 

for such son or daughter. 

(ii) Because of the placement of a son or daughter with the borrower for 

adoption or foster care. 

(iii) in order to care for the spouse, or a son, daughter, or parent, of the 

borrower, if such spouse, son, daughter, or parent has a serious health 

condition, as defined by 29 C.F.R. § 825.214, and the borrower will be entitled to 

a $0 monthly payment for the duration the family member cares for the 

individual with the serious health condition; 

(iv) Because of a serious health condition, as defined by 29 U.S. Code § 2611 and 

29 CFR §§ 825.113-119, and the borrower will have a $0 monthly payment for 

the duration of the condition. 

(v) Because of any qualifying exigency arising out of the fact that the spouse, or a 

son, daughter, or parent of the borrower is on covered active duty (or has been 

notified of an impending call or order to covered active duty) in the Armed 

Forces, as defined by 29 C.F.R. §§ 825.122, 124,126-127, and the borrower will 

have a $0 monthly payment for the duration of the exigency. 

(6) For all IDR plans, a borrower’s payment will be $0 if the borrower’s discretionary income is 
 

 

 

 

 

 

equal to or less than the applicable poverty guidelines. 

. 

(g) Adjustments to monthly payment amounts. Payments calculated under paragraph (f) are adjusted in 

the following circumstances: 

(1) In cases where the spouse’s loan debt is included in the borrower’s monthly payment 

amount, the borrower’s payment is adjusted by taking the outstanding principal and interest

balance of the borrower’s eligible loans for the purposes of proration and dividing that by the 

couple’s combined outstanding principal and interest balance on eligible loans for the purposes 

of proration. 

(2) In cases where the borrower also has loans made under the FFEL Program, the borrower’s 

payment is adjusted by taking the outstanding principal and interest balance of the borrower’s 

loans eligible to be repaid under an IDR plan and dividing that by the borrower’s outstanding

principal and interest balance on eligible loans for the purposes of proration. 

(h) Interest subsidies. 

(1) For the ICR Plan, there are no interest subsidies; 

(2) For the PAYE and REPAYE plans, there is an interest subsidy on Direct Subsidized Loans and 

Direct Subsidized Consolidation Loans that a borrower is eligible to receive during first 3 years of 

repayment under the PAYE and REPAYE plans, but only when the amount of the payment 

attributable to the loans is less than the amount of interest accruing on such loans; in such 

cases, the Secretary credits the borrower’s account with an amount equal to the amount of 

interest not covered by the borrower’s payment;

(3) For the IBR Plan, the 3-year period described in paragraph (2) is suspended for any month 

during which the borrower is not obligated to make a payment because they are in an economic 

hardship under § 685.204(g); 

(4) For the REPAYE plan, following the 3-year period described in paragraph (2) for Direct 

Subsidized Loans and Direct Subsidized Consolidation Loans, and during all periods of repayment 

under the REPAYE Plan on all other loans eligible to be repaid under REPAYE, there is an interest 

subsidy when the amount of the payment attributable to the loans is less than the amount of 

interest accruing on such loans; in such cases, the Secretary credits the borrower’s account with 

an amount equal to half of the amount of interest not covered by the borrower’s payment; and

(5) For EICR, in cases where the borrower’s monthly payment is scheduled to be $0, TK percent

of interest is not charged to the borrower. For the EICR plan, following the 3-year period 

described in paragraph (2) for Direct Subsidized Loans and Direct Subsidized Consolidation 

Loans, and during all periods of repayment under the EICR Plan on all other loans eligible to be 

repaid under EICR, there is an interest subsidy when the amount of the payment attributable to 

the loans is less than the amount of interest accruing on such loans; in such cases, the Secretary 

credits the borrower’s account with an amount equal to the amount of interest not covered by 

the borrower’s payment. 

(i) Changing repayment plans. Borrowers may change between IDR plans for which they are eligible or 

leave an IDR plan for another repayment plan for which they are eligible. 

(j) Interest capitalization. 

(1) For the ICR, REPAYE, and EICR plans, interest only capitalizes when it otherwise would under 

§ 682.202(b). 

(2) For the IBR or PAYE plans, interest capitalizes when the borrower’s payment becomes the 

amount under paragraphs (f)(2)(B) and (f)(3)(b), except that when payments are set based on 

paragraph (f)(2)(A) and (f)(3)(A), interest capitalization rules under § 682.202(b) are suspended. 
 

 

 

 

 

(3) For the IBR Plan, interest also capitalizes when the borrower’s payments are set in 

accordance with subsection (f)(2)(b) or when the borrower leaves the IBR Plan. 

(k) Forgiveness. 

(1) For borrowers repaying under ICR, for borrowers repaying under the IBR plan who are not 

new borrowers, and for borrowers repaying under the REPAYE and EICR plan who are repaying 

at least one loan received for graduate or professional study, including a Direct Consolidation 

Loan that repaid one or more loans received for graduate or professional study, the borrower 

receives forgiveness of the remaining balance of the borrower’s loans after the borrower has 

satisfied 300 monthly repayment obligations under paragraph (34); 

(2) For borrowers repaying under PAYE, for borrowers repaying under the IBR plan who are new 

borrowers, and for borrowers repaying under the REPAYE and EICR plan who are repaying only 

loans received for undergraduate study, including a Direct Consolidation Loan that repaid only 

loans received for undergraduate study, the borrower receives forgiveness of the remaining 

balance of the borrower’s loans after the borrower has satisfied 240 monthly repayment 

obligations under paragraph (34); 

(3) For borrowers repaying under EICR: 

(A) For every month in which a borrower satisfies a monthly repayment obligation as 

described in (f), the Secretary shall forgive the difference between the amount the 

borrower was required to pay in (f) and what the borrower would have paid on a 10-

year standard repayment plan based on the loan balance and interest rate that were 

applicable to the loans at the time the borrower entered the EICR Plan. 

(B) Any amount paid by the borrower in excess of the amount the borrower was 

required to pay in (f) should be applied after the Secretary applies forgiveness in this 

paragraph. 

(C) The borrower receives forgiveness of any remaining balance of the borrower’s loans 

after the borrower has satisfied 120 monthly repayment obligations under paragraph 

(4). 

(Alternative 3) For borrowers repaying under EICR: 

(A) For every month in which a borrower satisfies a monthly repayment obligation as 

described in (f), the Secretary shall forgive the difference between the amount the 

borrower was required to pay in (f) and the amount the borrower would repay monthly 

over a shortened cancellation period using standard amortization based on the loan 

balance and interest rate that were applicable to the loans at the time the borrower 

entered the EICR Plan. 

(B) The Secretary shall determine the shortened cancellation period upon determining 

the amount the borrower is required to repay in (f) based upon the borrower's adjusted 

gross income. The Secretary shall utilize a formula in which borrowers with an AGI at or 

less than 150% of the federal poverty level will have a cancellation period that equals 3 

years and borrowers with an AGI at or greater than TK will have a cancellation period 

that equals 15 years. 

(C) Any amount paid by the borrower in excess of the amount the borrower was 

required to pay in (f) should be applied after the Secretary applies forgiveness in this 

paragraph. 

(D) The borrower receives forgiveness of any remaining balance of the borrower’s loans 

after the borrower has satisfied 180 monthly repayment obligations under paragraph 

(4). 

(34) For all IDR plans, the following can lead to the borrower satisfying a monthly repayment 

obligation: 
 

 

 

 

 

 

(A) Making a payment under an IDR plan, including payments that are calculated to be 

$0, regardless of whether the payment was satisfied early or late; 

(B) Making a payment under the 10-year standard repayment plan under § 685.208(b), 

regardless of whether the payment was satisfied early or late; 

(C) Making a payment under a repayment plan with payments that are as least as much 

as they would have been under the 10-year standard repayment plan under § 

685.208(b), regardless of whether the payment was satisfied early or late; 

(D) Deferring or forbearing monthly payments for the following reasons: 

(i) A cancer treatment deferment under 455(f)(3) of the Act; 

(ii) A Peace Corps service deferment under §682.210(k), as applicable to Direct 

Loan borrowers under §685.204(j); 

(iii) An economic hardship deferment under §685.204(g); 

(iv) A military service deferment under §685.204(h); 

(v) A rehabilitation training program deferment §685.204(e); 

(vi) A unemployment deferment §685.204(f); 

(vii) A post-active duty student deferment §685.204(i); 

(v) An administrative forbearance or mandatory administrative forbearance 

under § 685.205(b); 

(vi) A medical or dental internship or residency forbearance under § 

685.205(a)(3); 

(vii) A national guard duty forbearance under § 685.205(a)(7); or 

(vii) A Department of Defense Student Loan Repayment forbearance under § 

685.205(a)(9) 

(E) Any period of forbearance; 

(F) Any periods in which payments are collected under § 685.211(d); 

(G) Making any payments pursuant to a rehabilitation agreement or other repayment 

agreement while in default, or making any voluntary payments while in default for 

which payments are at least as much as they would have been under an IDR plan; 

(H) On a Direct Consolidation Loan, any periods meeting the criteria in paragraph (A)-(F) 

on a loan that was consolidated. 

(l) Procedures. 

(1) To enter any IDR plan, and except as provided under TK, the borrower must complete an 

application on a form approved by the Secretary; 

(2) As part of the process of completing a Master Promissory Note or a Loan Consolidation 

Promissory Note, the borrower must consent to the disclosure of applicable tax information 

under §§ 455(e)(8) and 493C(c)(2) of the Act; and may opt into automatic enrolled in an incomedriven repayment plan should the borrower become significantly delinquent on the borrower’s

loans, defined as missing 80 days’ worth of payments. At this point, the borrower may choose a 

specific income-driven repayment plan into which to be automatically enrolled. 

(3) As part of the application for an IDR plan, and if the borrower has not already done so, the 

borrower must consent to the disclosure of applicable tax information under §§ 455(e)(8) and 

493C(c)(2) of the Act unless the borrower has opted into automatic enrollment into an incomedriven repayment plan and becomes significantly delinquent on the borrower’s loans, as

outlined in paragraph (2); 

(4) The Secretary uses the borrower’s consent under paragraphs (2) or and (3) to obtain the 

borrower’s income and family size from the Internal Revenue Service;

(5) If the Secretary cannot obtain the borrower’s income and family size from the Internal 

Revenue Service, the Secretary requires the borrower and spouse, as applicable, to provide 
 

 

 

 

 

documentation of applicable income and family size information; 

(6) After the Secretary obtains sufficient information from the borrower or otherwise to 

calculate the borrower’s monthly payment amount, the Secretary calculates the borrower’s

payment and establishes the 12 monthly repayment obligations for which the borrower will be 

obligated to make a payment in that amount; 

(7) The Secretary then sends to the borrower a repayment disclosure outlining the borrower’s 

payment amount, explains in general terms how the payment is calculated, informs the 

borrower of the procedures that will be followed under this subsection, and requests that the 

borrower contact the Secretary if the payment amount disclosed to the borrower is 

unaffordable to the borrower; 

(8) If the borrower contacts the Secretary and indicates the payment amount is not reflective of 

the borrower's income or family size, the Secretary allows the borrower to submit alternative 

documentation of income or family size not based on tax information to account for 

circumstances such as a decrease in income since filing a tax return, separation from a spouse 

following filing taxes jointly with that spouse, the birth or impending birth of a child, or other 

comparable circumstances; 

(9) If the borrower provides alternative documentation under paragraph (8) or the Secretary 

must obtain documentation from the borrower or spouse under paragraph (5), the Secretary 

places the borrower’s loans into an administrative forbearance under § 685.205(b)(9) to

promptly process the borrower’s application and information;

(10) On an annual basis the Secretary follows the procedures in paragraphs (4) through (9) once 

the borrower only has 3 monthly payments remaining under the 12-month period specified 

under paragraph (6). 

(11) If the Secretary requires information from the borrower under paragraph (5) to recalculate 

the borrower’s monthly repayment amount under paragraph (10), and the borrower does not

provide the necessary documentation to the Secretary by the time the last payment is due 

under the 12-month period specified under paragraph (6), then: 

(A) For the IBR and PAYE plans, the borrower’s monthly payment amount is the amount

under paragraph (f)(2)(B) or (f)(3)(B); 

(B) For the ICR Plan, the borrower’s monthly payment amount is the amount the 

borrower would have paid under a 10-year standard repayment plan based on the loan 

balance and interest rate that existed for the loan when the borrower entered ICR; 

(C) For the REPAYE Plan, the borrower is removed from the REPAYE plan and placed into 

an alternative repayment plan under § 685.208(j) with fixed payments that are 

amortized over a period of time that is equal to the lesser of: 

(i) 10 years; or 

(ii) The remaining period of time that the borrower would have needed to repay 

loans under the REPAYE plan to receive forgiveness under subsection (j); 

(D) For the EICR Plan TK. 

(12) At any point during the 12-month period specified under paragraph (6), the borrower may 

request that the Secretary recalculate the borrower’s payment earlier than would have

otherwise been the case to account for a self-reported change in the borrower’s circumstances;

in such cases, the 12-month period specified under paragraph (6) is reset based on the 

borrower’s new information. 

(13) If the borrower has opted into automatic enrollment in an income-driven plan, as outlined 

in paragraph (2), and subsequently becomes 60 days delinquent on the borrower’s loans, the 

Secretary provides the borrower with the following: 

(A) Notification that the borrower is at least 60 days delinquent; 

(B) A repayment disclosure outlining the borrower’s payment amounts if the borrower 

were to enroll in available income-driven repayment plans, based on information 
available to the Secretary; 

(C) An explanation that the Secretary shall enroll the borrower into an income-driven 

plan, as outlined in paragraph (2), if the borrower becomes 80 days delinquent unless 

the borrower contacts the Secretary to opt out. 

(14) If the borrower has opted into automatic enrollment in an income-driven plan, as outlined 

in paragraph (2), and subsequently becomes 80 days delinquent on the borrower’s loans, and if 

the borrower has not chosen a specific income-driven repayment plan, the Secretary shall: 

(A) Enroll the borrower into the income-driven repayment plan that requires the lowest 

monthly payment amount; 

(B) If more than one income-driven repayment plan would offer the borrower the same 

lowest monthly payment amount, enroll the borrower into the income-driven 

repayment plan that has the most favorable terms for the borrower 

(153) The Secretary tracks a borrower’s progress towards eligibility for forgiveness under 

subsection (k) automatically and forgives loans that meet the criteria under subsection (k) 

without the need for an application or documentation from the borrower. 

Last updated 10/25/2021