A payment that swallows your paycheck is a common and stressful problem. Income-driven repayment is a set of federal plans built for exactly that. Instead of locking your payment to the size of your loan, these plans tie it to how much you earn and how many people are in your family. The point is to keep the payment livable.

How it works

On a , your payment is whatever it takes to pay off the loan over a fixed number of years, no matter what you earn. flips that. It looks at your income and family size and asks you to pay only a slice of what's left after basic living costs. If you earn very little, your required payment can fall to a small amount, or even zero, for that year.

Here is a plain example. Two people owe the same amount. One earns a comfortable salary and one just lost most of their hours. On an income-driven plan, the person earning less pays less, because the payment follows the paycheck. The debt is the same, but the monthly burden is not.

Who it's for

These plans are for federal student loans. Private student loans from a bank don't qualify, though some private lenders offer their own hardship options worth asking about. If you're not sure which kind you have, log in to the federal student aid website to see them listed, or read Federal vs. Private Student Loans for the difference.

Income-driven plans only cover federal student loans. If you have private loans, call the lender directly and ask about hardship or reduced-payment options. They won't volunteer them, but many exist.

The trade-offs to understand

A lower payment is a real relief, but know the strings. Stretching payments over more years can mean paying more in total. After a long period of qualifying payments, any remaining balance may be forgiven, though the rules around that change over time; Student Loan Forgiveness Programs covers how forgiveness works. And you have to your income every year, or your payment can jump back up.

Tip
Set a yearly reminder to re-certify your income. Missing the re-certification is the most common way people get bumped off their plan and hit with a much higher payment they weren't expecting.

How to start

  1. 1Log in to the official federal student aid website and find your .
  2. 2Use the income-driven repayment application there to compare plans and estimated payments.
  3. 3Submit the application with your income information.
  4. 4Mark your calendar to re-certify your income every year, on time.

If your payment doesn't fit your life, you don't have to white-knuckle it. Tying the payment to your income is a built-in, free option made for moments like this. For the bigger picture of life after graduation, from grace periods to picking a plan, see Repaying Your Student Loans.