What Changed With Federal Student Loan Payment Plans and Borrower Limits

The Federal Student Loan Program Ended Income-Driven Repayment Plans and Removed the Annual Borrowing Cap

In 2023, the U.S. Department of Education discontinued the income-driven repayment (IDR) plans that had allowed borrowers to cap monthly payments based on their earnings. At the same time, Congress removed the annual limit on how much undergraduate students could borrow in federal loans. These changes affect how much you can borrow, how much you pay each month, and what options exist if your income drops or you face hardship.

If you had an IDR plan before the change, your loan was moved to a standard 10-year repayment schedule unless you took action. If you are borrowing now, you can no longer hit a federal cap on annual undergraduate loans. Understanding what ended and what remains available helps you plan around the new structure.

Key Takeaways

• Income-driven repayment plans that tied your monthly payment to your salary no longer exist; loans were moved to standard 10-year repayment unless you chose a different plan.
• The annual borrowing limit for undergraduate students was removed, so you can now borrow more per year, but total lifetime limits still apply.
• If you were on an IDR plan and did not choose a new repayment option, your payment increased to the standard amount, which may be higher than what you were paying.
• Income-contingent repayment (ICR) remains available for federal loans and still ties your payment to your income, though it works differently than the old IDR plans.
• Private student loans were not affected by these changes and continue to operate under their own terms.

What Happened to Income-Driven Repayment Plans

The four income-driven repayment plans—Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), and Income-Contingent Repayment (ICR)—were consolidated. PAYE, REPAYE, and IBR were discontinued. Borrowers enrolled in those plans were automatically moved to standard 10-year repayment in late 2023, unless they selected a different option before the deadline.

If you were paying $150 a month under PAYE because your income was low, your payment jumped to the standard amount—often $300 to $500 or more per month—when the switch happened. The Department of Education sent notices to affected borrowers, but many did not act in time. If you were moved to standard repayment and cannot afford the new payment, you can contact your loan servicer to explore other plans.

Income-Contingent Repayment (ICR) still exists and remains available to borrowers with federal loans. ICR calculates your payment based on your income and family size, though the formula differs from the old income-driven plans. For Direct Loans, ICR caps your payment at 20 percent of your discretionary income over 25 years. For older Federal Family Education Loans (FFEL), ICR works differently and may result in a higher payment.

The Removal of Annual Borrowing Limits for Undergraduates

Before 2023, undergraduate students could borrow a maximum amount per academic year—$5,500 to $7,500 depending on class standing and dependency status. Congress removed this annual cap, meaning you can now borrow more in a single year if your school certifies the need. The total lifetime limit for undergraduate borrowing remains in place, but the annual step no longer restricts how much you can take out in one year.

This change means students with high costs—such as those attending private universities or living in expensive areas—can borrow more per year to cover tuition, fees, and living expenses. However, borrowing more also means owing more after graduation. Graduate and professional students already had no annual limit, so this change primarily affected undergraduates.

Your school's financial aid office determines how much you can borrow based on your cost of attendance and other aid you receive. The removal of the annual cap does not mean unlimited borrowing; it means the federal government no longer sets a year-by-year ceiling. Your school still does.

How Your Monthly Payment Changed If You Were on an IDR Plan

When the income-driven plans ended, borrowers were sorted into three groups. Those with Direct Loans were moved to standard 10-year repayment. Those with FFEL loans were moved to standard repayment or, if they consolidated into Direct Loans, could choose ICR. Those who took action before the deadline could select a different repayment plan and avoid the automatic switch.

If you did not act and were moved to standard repayment, your payment is now calculated to pay off your entire loan balance in 10 years, regardless of your income. For someone with $50,000 in loans, this might mean a payment of $500 to $600 per month instead of the $200 to $300 they were paying under an income-driven plan. The higher payment can strain a budget, especially if your income has not increased.

You can change your repayment plan at any time by contacting your loan servicer or logging into your account on StudentAid.gov. If you are struggling with the new payment, ask about income-contingent repayment or request a temporary forbearance while you explore options.

Income-Contingent Repayment as Your Remaining Income-Based Option

Income-Contingent Repayment (ICR) is the only federal repayment plan that still ties your payment to your income. For Direct Loans, your monthly payment is the lesser of two amounts: 20 percent of your discretionary income divided by 25 years, or what you would pay on a standard 12-year plan. Discretionary income is your adjusted gross income minus 100 percent of the federal poverty line for your family size.

ICR is available to all borrowers with Direct Loans and to those with FFEL loans who consolidate into Direct Loans. It is not available for PLUS loans or Perkins loans. If your income is very low, your ICR payment can be as little as $0 per month, though interest still accrues and unpaid interest capitalizes (gets added to your principal) after 20 years.

To enroll in ICR, contact your loan servicer or use the repayment plan selection tool on StudentAid.gov. You will need to provide income documentation, usually your most recent tax return. Your payment is recalculated each year based on your updated income, so if you earn more, your payment increases; if you earn less, it decreases.

What Remains Available for Borrowers Facing Hardship

If you cannot afford any repayment plan, federal loans offer forbearance and deferment. Forbearance pauses your payments for up to three years, though interest continues to accrue. Deferment also pauses payments and, for subsidized loans, stops interest from accruing during the deferment period. Both are temporary measures, not permanent solutions.

Public Service Loan Forgiveness (PSLF) remains available to borrowers working full-time for a government agency or nonprofit organization. After 120 may have access to payments under an income-driven or income-contingent plan, the remaining balance is forgiven. The rules changed in 2021 to make it easier to may have access to, and the Department of Education has approved forgiveness for hundreds of thousands of borrowers.

If you are unable to work due to disability, you may be may be able to access for Total and Permanent Disability (TPD) discharge, which erases your federal loans entirely. You can also request a closed school discharge if your school closed while you were enrolled or shortly after you withdrew, or a false certification discharge if your school falsely certified your ability to benefit from the program.

How to Choose a Repayment Plan Now

Your choice of repayment plan depends on your income, loan balance, and how quickly you want to pay off the debt. If you earn a stable, moderate to high income and want to pay off your loans in 10 years, standard repayment is the fastest and cheapest option. If your income is low or variable, income-contingent repayment keeps your payment affordable and adjusts as your circumstances change.

To change your plan, log into your account on StudentAid.gov, contact your loan servicer, or call the Federal Student Aid Information Center at 1-800-4-FED-AID (1-800-433-3243). You can switch plans as often as you need, and there is no fee. If you are unsure which plan fits your situation, the repayment plan selection tool on StudentAid.gov walks you through questions about your income and goals.

Keep in mind that choosing a plan with a lower monthly payment means paying more interest over time. A $50,000 loan paid off in 10 years costs less in total interest than the same loan paid off in 25 years. Balance affordability now against the total cost later.

Frequently Asked Questions

Can I get back on an income-driven plan if I was moved to standard repayment?

No, the old income-driven plans no longer exist. However, you can enroll in Income-Contingent Repayment (ICR), which still ties your payment to your income. Contact your loan servicer to switch to ICR at any time.

What if I cannot afford my new standard repayment amount?

Contact your loan servicer immediately and ask about income-contingent repayment, forbearance, or deferment. You can also request a temporary payment reduction while you explore longer-term options. Do not ignore the payment; doing so damages your credit and can lead to default.

Does the removal of the annual borrowing cap mean I can borrow unlimited money?

No. The annual cap was removed, but your school still sets a limit based on your cost of attendance and other aid you receive. You also have a lifetime borrowing limit. Ask your financial aid office how much you can borrow for your program.

If I have FFEL loans, can I enroll in income-contingent repayment?

Only if you consolidate your FFEL loans into a Direct Consolidation Loan. Once consolidated, you can choose ICR. Consolidation is permanent and may change your interest rate and repayment terms, so review the terms before you consolidate.

Will my payment ever go down if I am on income-contingent repayment?

Yes, if your income decreases. Your ICR payment is recalculated each year based on your updated income and family size. You will need to provide new income documentation, usually your tax return, each year.