Definition
A category of federal student loan repayment plans that set the monthly payment as a share of the borrower's discretionary income rather than by the loan balance, recalculated each year from income and family size. After a set number of years of qualifying payments, any remaining balance is forgiven. The specific plans, formulas, and terms are set by the Department of Education and change over time.
Why it matters
For a borrower whose balance is large relative to income, IDR is the difference between an impossible payment and a survivable one, and it is the repayment route that counts toward Public Service Loan Forgiveness. The trade-off is that low payments may not cover interest, so the balance can grow for years before forgiveness, and forgiveness outside PSLF may be taxable.