Student Debt Resource

9: Leaving an IDR Plan

/ Student Debt E-book

An IDR plan may not work for you throughout the entire repayment of your loan(s). It is important to understand not only when you can switch plans, but also what are the consequences associated with switching an IDR plan.  

Generally, you can switch between payment plans at any time. You can switch between IDR plans, from an IDR plan to a balance based plan, or from a balance based plan to an IDR plan. In fact, the only restriction on switching between plans is that when switching from an IDR plan to a balance based plan, or from a balance based plan to another balance based plan, you cannot switch to a balance based plan with a length of time less than the time you have already spent in repayment.  

For example, if a borrower made 11 years of payments under the PAYE plan, that borrower could not switch to a Standard Repayment Plan (10 years). Similarly, a borrower who made 12 years of payments under the Extended Repayment Plan could not switch to the Standard Repayment Plan (10 years). 

What are the consequences if I switch plans?

There are three matters to consider when it comes to switching plans: 

  • First, accrued interest always capitalizes when switching between plans. When switching from a balance based plan to an IDR plan, this is not relevant since balance based plans prevent interest from accruing. However, capitalization should be considered when switching between IDR plans or from an IDR plan to a balance based plan since IDR plans often result in large amounts of accrued interest.  
  • Second, if you switch from the IBR plan to another IDR plan or balance based plan, you must switch to a Standard Repayment Plan (10 year) first, make one payment under the Standard Repayment Plan (10 year), and then switch to the plan you desire (unless of course the Standard Repayment Plan was your desired plan). If you cannot afford the required Standard Repayment Plan (10 year) payment, you can request your loan servicer reduce the required payment to $5 via a reduced payment forbearance. Only the IBR plan requires this step. Individuals in the PAYE, REPAYE and ICR plans may switch to another IDR plan or balance based plan without making this additional Standard Repayment Plan (10 year) payment.  
  • Third, if you switch from an IDR plan to a different IDR plan, or from a balance based plan to an IDR plan, you must certify your income. If you request an IDR plan via the Income Driven Repayment (IDR) Plan Request Form, but do not certify your income, you will automatically be removed from your existing plan and placed in the Standard Repayment Plan (10 years) until you certify your income. Once certification of income is completed, you are then placed in the IDR plan you desired.  
If I switch plans, what will my new repayment period be?

Your new repayment period will depend on the plan you have chosen to switch to. For the standard, extended, and graduated plans, the repayment period is the period provided under the new repayment plan, calculated from the day your federal loan first entered repayment. For example, if you have been repaying under the ICR plan for 5 years, and switch to a standard ten-year payment plan, your new payments will be calculated at an amount necessary to pay off your remaining loan balance in five years.  

Note: Switching from an IDR plan to a balance based plan, means that you forfeit access to the loan cancellation provisions offered under those IDR plans as well as access to Public Service Loan Forgiveness.  

Under the IDR plans, which have cancellation provisions, the rules are similar but slightly different. If you switch from an IDR plan to another IDR plan, or balance based plan to an IDR plan, your repayment period for the new IDR plan is the amount of time necessary to receive cancellation under the new IDR plan (including time spent in repayment in other plans). For example, if you made payments under the PAYE plan for 4 years then switched to the REPAYE plan, you would achieve loan cancellation after 21 years (as the REPAYE plan provides for loan cancellation after 25 years). 

Note: The rules for IDR plan repayment periods are the same, regardless of how many times you switch plans. For example: If Peter Prosecutor made 2 years of monthly payments under the Standard 10-Year Repayment plan, then switched to the REPAYE plan where Peter made 7 years of monthly payments, Peter would qualify for loan cancellation after 11 years if Peter switched to the PAYE plan (which offers loan cancellation after 20 years).