How Income-Driven Repayment Forgiveness Works After 20–25 Years

How does income-driven repayment forgiveness work after 20–25 years?

Income-driven repayment (IDR) forgiveness is a long-term path for many federal student loan borrowers who can’t fully repay their balance within a standard 10-year term. Under federal IDR programs, your monthly payment is set according to your income and family size, and after either 20 or 25 years of qualifying payments any remaining balance is forgiven. That forgiveness can provide meaningful relief, but it requires careful enrollment, annual recertification, and record-keeping to ensure qualifying payments are counted correctly.

Which loans and plans qualify

• Eligible loans: Generally only federal Direct Loans qualify for IDR repayment and forgiveness. If you have older FFEL or Perkins loans you may need to consolidate into a Direct Consolidation Loan to access IDR options—note that consolidation can affect how earlier payments count toward forgiveness, so check with your servicer before consolidating. (See more on choosing plans and consolidation in FinHelp’s guide on Selecting the Right Income-Driven Repayment Plan for Student Loans).

• Common IDR plans: Historically these included IBR (Income-Based Repayment), PAYE (Pay As You Earn), REPAYE, and others. The U.S. Department of Education has been evolving IDR rules; the newer SAVE plan (Saving on a Valuable Education) and the consolidated set of options are documented at Federal Student Aid. For the authoritative list and exact plan mechanics, check the Department of Education’s resource on IDR plans: https://studentaid.gov/manage-loans/repayment/plans/income-driven.

How many years until forgiveness?

• Typical timelines: Forgiveness occurs after 20 years for borrowers whose loans were for undergraduate study only and after 25 years for borrowers who received graduate or professional federal loans. The precise rule depends on the plan and which loans are included in the repayment track; consult studentaid.gov for your specific loan types.

• Special counts: The Department’s IDR Account Adjustment (announced in recent years) helped count past qualifying payments for many borrowers who were previously denied credit toward forgiveness. If you have a long repayment history, ask your servicer whether an account adjustment applied to you.

What counts as a qualifying payment

To reach forgiveness you must make the required number of qualifying, on-time payments while:

• You are enrolled in an IDR plan; and
• The loans are not in default; and
• Payments meet the plan’s definition of qualifying (usually on-time monthly payments or equivalent, including months with partial payments that meet the minimum).

Some administrative periods—such as the COVID payment pause—were treated specially and may have been counted by Department action. Always confirm with your servicer that payments have been recorded correctly and request written confirmation if you’re near the forgiveness threshold.

How payments are calculated

IDR plans tie monthly payments to a percentage of your discretionary income and family size. Historically the payment cap ranged from about 10% to 15% of discretionary income depending on the plan and loan origination year; newer policy changes (including the SAVE plan) lowered payments for many borrowers and increased interest subsidies. Because plan mechanics and percentages can change, use the Department of Education’s repayment estimator and the official plan pages for current calculations (https://studentaid.gov).

Example (illustrative only):

• A borrower with modest income might pay several hundred dollars per month under IDR, whereas their standard 10-year payment could have been much higher. After making 20 or 25 qualifying years of payments under IDR the remaining principal and unpaid interest are forgiven.

Tax treatment of forgiven amounts (as of 2025)

Under the American Rescue Plan Act of 2021, federal student loan forgiveness that occurs between 2021 and 2025 is excluded from federal taxable income. That means borrowers who receive IDR forgiveness during that period should not owe federal income tax on the discharged amount. However:

• The tax exclusion currently applies through December 31, 2025; the treatment of forgiven balances after 2025 depends on whether Congress extends this provision or new law changes tax rules.
• States may treat forgiven amounts differently. Some state tax authorities could consider forgiven loan amounts taxable at the state level; check state guidance or consult a tax professional.

FinHelp has a focused discussion on rules and practical steps in our post on Tax Implications of Loan Forgiveness: What to Expect.

Common pitfalls and how to avoid them

1. Failing to recertify income annually: If you miss annual recertification your payment may be recalculated and you may lose months that would otherwise count as qualifying. Always complete recertification on time and keep proof.

2. Consolidating without checking consequences: Consolidating FFEL or Perkins loans into a Direct Consolidation Loan may be required to access IDR forgiveness, but consolidation generally starts a new repayment clock unless prior qualifying payments are credited. Confirm with your servicer and weigh options before consolidating; our consolidation guide explains pros and cons: https://finhelp.io/glossary/consolidating-federal-student-loans-after-grad-school-pros-and-cons/.

3. Relying on verbal statements from servicers: Get any important promise in writing and regularly download your payment history. If you dispute a record, escalate in writing and keep copies.

4. Assuming private loans qualify: Private student loans do not qualify for federal IDR plans; talk to your lender or a financial planner about refinancing or other strategies.

Practical steps to maximize your chance of forgiveness

• Enroll in an IDR plan that matches your loan type and long-term goals. Use the Department of Education’s online tools and your loan servicer’s guidance.
• Recertify income every year and update your family-size information when it changes.
• Keep a dated file of payment records, recertification confirmations, and any correspondence with your servicer.
• Before consolidating, ask your servicer whether consolidation will reset your qualifying payment count and whether any account adjustment can restore earlier payments.
• If you work in public service, check whether the Public Service Loan Forgiveness (PSLF) program or the Temporary Expanded PSLF Waiver (if applicable in your history) is a better path; for public servants some payments can count both toward PSLF and IDR forgiveness if documented correctly. See FinHelp’s PSLF coverage: https://finhelp.io/glossary/navigating-public-service-loan-forgiveness-eligibility-and-steps/.

Example scenario

Dana graduated with $75,000 in federal loans, including graduate school debt. Because part of Dana’s balance was graduate loans, her IDR forgiveness track requires 25 years of qualifying payments. She enrolls in an IDR plan, recertifies annually, and keeps all records. After 25 years of payments, any remaining balance is forgiven. If Dana’s forgiveness occurs in 2025, the discharged amount should be excluded from federal income under the American Rescue Plan tax provision, but she still checks state rules and confirms with a tax advisor before filing.

What to ask your loan servicer

• How many qualifying payments are recorded on my account today?
• If I consolidate, will my qualifying payment count reset?
• Which documents do you have on file for my annual recertification?
• Has the Department of Education applied an account adjustment that affects my record?

Where to get authoritative information

• U.S. Department of Education, Federal Student Aid — Income-Driven Repayment Plans and forgiveness details: https://studentaid.gov/manage-loans/repayment/plans/income-driven
• Consumer Financial Protection Bureau — plain-language guidance on IDR: https://www.consumerfinance.gov/learn/what-are-income-driven-repayment-plans/

FinHelp’s internal resources linked in this article can help with plan selection, tax considerations, and consolidation questions:

• Selecting the Right Income-Driven Repayment Plan for Student Loans: https://finhelp.io/glossary/selecting-the-right-income-driven-repayment-plan-for-student-loans/
• Income-Driven Repayment Forgiveness: Eligibility and Trade-Offs: https://finhelp.io/glossary/income-driven-repayment-forgiveness-eligibility-and-trade-offs/

Bottom line

IDR forgiveness after 20–25 years can be a lifeline for borrowers whose incomes make standard repayment unaffordable. The program’s benefits are real, but they rely on accurate record-keeping, timely annual recertification, and an understanding of how consolidation or job changes affect qualifying payments. Use the Department of Education’s tools, keep clear records, and consult a qualified student loan counselor or tax professional for advice tailored to your circumstances.

Professional disclaimer

This article is educational and not personalized financial, legal, or tax advice. Rules and tax treatment are subject to change; confirm current law and program details with the U.S. Department of Education, your loan servicer, and a qualified tax advisor.