SAVE vs. PAYE vs. IBR
which income-driven plan actually pays less.

The Big Three (and Their Status)

Three plans dominate the conversation:

• SAVE (Saving on a Valuable Education). Replaced REPAYE in 2023 with more generous terms. As of 2025–2026 it has been blocked by federal courts and is in administrative forbearance — borrowers enrolled in it are not making payments and not earning forgiveness credit. Whether SAVE survives in any form is still working its way through the courts.
• PAYE (Pay As You Earn). Closed to new borrowers in 2024 but reopened to limited groups in 2026 as part of the SAVE litigation fallout. Caps payments at 10% of discretionary income; forgiveness at 20 years.
• IBR (Income-Based Repayment). The oldest plan, always available. Two flavors — "old IBR" for pre-July-2014 borrowers (15% of discretionary, 25-year forgiveness) and "new IBR" for post-July-2014 borrowers (10% of discretionary, 20-year forgiveness).

Discretionary Income: the Key Variable

All three plans define discretionary income as your AGI minus a multiple of the federal poverty guideline for your family size:

• IBR: AGI − 150% of poverty line
• PAYE: AGI − 150% of poverty line
• SAVE (when in effect): AGI − 225% of poverty line

That 225% threshold is why SAVE payments looked so much lower. For a single filer making $55,000 in 2024, the 150% threshold is about $22,590, leaving $32,410 of discretionary income. The 225% threshold is about $33,885, leaving only $21,115. Apply 10% on top of each, and you get a monthly payment of $270 under PAYE/IBR vs. $176 under SAVE — a 35% reduction, before SAVE was paused.

Forgiveness Timeline

• IBR (post-2014): 240 qualifying payments / 20 years.
• IBR (pre-2014): 300 qualifying payments / 25 years.
• PAYE: 240 qualifying payments / 20 years.
• SAVE (as designed): 240 payments for undergrad-only; 300 for any grad debt.

Each year of payments while the plan is in administrative forbearance generally does count toward forgiveness, but rules have shifted multiple times — confirm with studentaid.gov for your specific status.

Payment Caps

PAYE and old-IBR include a "standard payment cap" — your IDR payment never exceeds what you'd pay on the 10-year standard plan. This matters when your income climbs. If your standard payment is $480 and 10% of discretionary income would compute to $720, PAYE caps you at $480. New IBR has the same cap; SAVE did not.

The cap is why high-earning borrowers with modest balances often hit a ceiling and effectively pay off the loan on a normal schedule even on an IDR plan.

When Each Plan Wins

• SAVE (when reinstated): lowest monthly payment for almost everyone. Best for borrowers expecting long-term forgiveness via PSLF or 20–25-year IDR.
• PAYE: when SAVE is unavailable, this is the default first choice for borrowers eligible to enroll. Identical 10% payment as new IBR but with the standard-payment cap.
• IBR: the universal fallback. Available to all borrowers; only plan that grad-school PLUS borrowers (parent PLUS consolidated) can use.

PSLF Interaction

Public Service Loan Forgiveness forgives the balance after 120 qualifying payments (10 years) for borrowers working full-time at qualifying public-service employers. PSLF only counts payments made on an IDR plan or the standard 10-year plan. Most PSLF borrowers want the lowest possible IDR payment for 120 months — which historically meant SAVE, and currently means PAYE or IBR while SAVE is paused.

The Tax Bomb

Forgiveness under IDR (not PSLF) is treated as taxable income at the federal level after 2025 unless Congress extends the current exclusion. A borrower with $80,000 forgiven in year 21 would owe roughly $18,000–$25,000 in federal tax in that year. PSLF forgiveness is tax-free. Plan for the tax bomb if you're targeting non-PSLF IDR forgiveness — the student loan calculator projects the forgiveness amount so you can estimate the tax impact.

Sources

U.S. Department of Education / Federal Student Aid (studentaid.gov); 34 CFR § 685.209 and § 685.221; CFPB student loan resources. Plan availability and rules have changed several times since 2023 — always verify against studentaid.gov before enrolling.