Content provided by Credible. Credible is solely responsible for this content and the services it provides. New York Post receives a fee if you click a link below and close a loan through Credible. WHY TRUST CREDIBLE: Our goal is to give you the tools and confidence you need to improve your finances. We do that by creating expert-curated and deeply-researched articles that adhere to our editorial guidelines. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS #1681276, is referred to here as "Credible."Paying off student loans can feel like a never-ending burden, but there may be light at the end of the tunnel. Some income-driven repayment (IDR) plans offer student loan forgiveness after 20 years of payments, while others offer forgiveness after 25 years.
As long as you keep up with payments and don’t go into default, you could see your remaining balance erased after two decades. You may even qualify for a forgiveness program that offers relief much sooner.
Student loans forgiveness after 20 years
Federal student loans are eligible for a variety of repayment plans, some of which offer forgiveness after 20 or 25 years. Specifically, IDR plans can forgive your remaining balance at the end of your term.
IDR can be a great choice for borrowers who can’t afford payments on the standard plan. They stretch out your repayment timeline and adjust your payments to a percentage of your discretionary income.
Plus, IDR plans are the only options eligible for Public Service Loan Forgiveness (PSLF). If you’re pursuing that program, you’ll need to put your federal loans on an IDR program to qualify.
That said, there are some downsides to IDR plans. For one, you could pay more interest on an IDR plan since you’ll be in debt for a lot longer, and your debt balance could grow.
“It will cost you more over the life of the loan in interest by paying under the IDR plan for 20 or 25 years versus the standard 10-year plan,” said Jill Desjean, a senior policy analyst with the National Association of Student Financial Aid Administrators.
Second, IDR plans have varying eligibility requirements and repayment structures. Not only is this confusing for borrowers, but not every borrower or loan type qualifies for every IDR plan. You must also recertify your eligibility every year.
Lastly, the student loan forgiveness you receive after 20 or 25 years on an IDR plan may be treated as taxable income. That means you might owe taxes on the discharged amount before you can fully wash your hands of your student debt.
Loan forgiveness through income-driven repayment plans
The Department of Education currently offers four income-driven repayment plans for federal student loan borrowers, each with its own specific guidelines. Here are the details.
Pay As You Earn (PAYE): 20 years
The PAYE plan adjusts your monthly payments to 10% of your discretionary income — though your payment can never be more than what you would owe under the Standard Plan. After making payments for 20 years, any remaining balance will be forgiven.
The following loan types are eligible for PAYE:
- Direct Subsidized and Unsubsidized Loans
- Direct PLUS Loans made to graduate students
- Direct Consolidation Loans that didn’t pay off any parent loans
- Subsidized and Unsubsidized Federal Family Education Loans (FFEL), if consolidated
- FFEL PLUS Loans made to graduate or professional students, if consolidated
- FFEL Consolidation Loans that didn’t repay a PLUS loan made to parents
- Perkins Loans, if consolidated
PAYE also offers a helpful interest subsidy — if your monthly payments don’t cover all the interest that accrues on your Direct Subsidized Loans, the government will cover the rest for three years.
Revised Pay As You Earn (REPAYE): 20 or 25 years
Under the REPAYE plan, payments are set to 10% of your discretionary income. You’ll make payments for 20 years if you have undergraduate loans; if any loans are from your graduate studies, you must make payments for 25 years. Once the loan term is complete, any remaining balance can be forgiven.
As with the PAYE plan, all federal student loans are eligible for REPAYE, with the exception of loans made to parents (or consolidation loans that paid off parent loans). FFEL and Perkins Loan borrowers must consolidate their loans to make them eligible for REPAYE.
If you have Direct Subsidized Loans and your monthly payments don’t cover all the interest that accrues, the government will cover the rest for three years — and half the accrued interest after that.
If you have Direct Unsubsidized Loans and your payments don’t cover the accrued interest, you’ll only have to pay half the remaining interest while you’re enrolled in this plan.
Income-Based Repayment (IBR): 20 or 25 years
The IBR plan sets your repayment terms based on when you borrowed. If you were a new borrower after July 1, 2014, your monthly payments will be 10% of your discretionary income and you’ll get a 20-year term.
Borrowers who took out loans before that date will have monthly payments set at 15% of their discretionary income and a term of 25 years. If you still have a balance at the end, it will be forgiven.
As with PAYE and REPAYE, all federal student loans are eligible, except for loans made to parents. Borrowers with Perkins Loans will have to consolidate them before applying for IBR. The government will cover any unpaid interest on your subsidized loans for three years.
Income-Contingent Repayment (ICR): 25 years
The ICR plan adjusts your monthly payments to 20% of your discretionary income or the amount you’d pay on a fixed 12-year plan — whichever is lower. There’s no interest subsidy for ICR, so you’ll have to pay all the interest that accrues. If you still owe money at the end of 25 years, the remaining balance will be forgiven.
The ICR plan is the only income-driven option available to parent borrowers. If you borrowed federal loans for your child’s education, you can apply for ICR if you consolidate your parent loans first. Virtually all other federal student loans are also eligible but may require consolidation first, depending on the loan type.
How to apply for student loan forgiveness after 20 years
If you want to enroll in an IDR plan and start making progress toward loan forgiveness, apply on the Federal Student Aid website. You can request a specific IDR plan or simply ask your loan servicer to select whichever option gives you the lowest payments.
When you’re enrolled in IDR, you’ll have to recertify your eligibility on an annual basis. This means updating your income and family size so that your loan servicer can adjust your payments accordingly.
There’s no specific application for IDR loan forgiveness after 20 or 25 years, but your loan servicer should notify you when you’re getting close. It’s worth keeping track of your progress and contacting your loan servicer as you near the end of your term.
| Tip: If you’re not sure an IDR plan is a good fit, use Federal Student Aid’s Loan Simulator tool to see how each option affects your loan’s repayment timeline and total costs. |
Other student loan forgiveness options
If you want to get rid of your student loans sooner, explore alternative options for getting out of student loan debt, including forgiveness. Teacher Loan Forgiveness and PSLF, for instance, could offer significant relief in as little as five to 10 years — though you must work in an eligible job to qualify.
The Department of Education has also proposed a new IDR plan that could provide loan forgiveness sooner. “The new IDR plan will be a game-changer for many borrowers, especially undergrads,” said student loan lawyer Stanley Tate.
This plan would revise REPAYE and slash undergraduate loan payments from 10% to 5% of the borrower’s discretionary income. Borrowers with a balance of $12,000 or less could get loan forgiveness after 10 years. If you owe more, you could receive loan forgiveness in 10 to 25 years, depending on how much you owe and the loan types you have.
| Important: It’s not yet known when borrowers can enroll in the newly proposed IDR plan, and there are several administrative steps that must happen before it can be finalized. However, the Department of Education hopes that some parts of the plan can be implemented before the end of 2023. |
Student loan forgiveness and taxes
The government typically treats the loan forgiveness you receive on an IDR plan as taxable income. Depending on your annual earnings and loan balance, the amount that’s forgiven could potentially push you into a higher tax bracket.
But for now, borrowers don’t have to worry about paying taxes on forgiveness thanks to the American Rescue Plan. Any student loan forgiveness you receive before the end of 2025 is exempt from federal taxation.
Not eligible for forgiveness?
If you have private student loans or otherwise don’t qualify for federal loan forgiveness, refinancing your debt could help you save money and better manage your repayment. While refinancing means you won’t be eligible for future forgiveness opportunities, you could potentially lower your interest rate or reduce your monthly payment.
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