The burden of student loan payments can often feel insurmountable and confusing, leaving borrowers unsure of what solutions are available. However, amidst the maze of repayment options, there is one particular avenue that may initially sound too good to be true: $0 payments on income-driven repayment plans. This perk is available on ICR, IBR, PAYE, and the newly created SAVE plan.
Today, we will explore how these zero-dollar payments work, who qualifies for them, their advantages, disadvantages, and more.
Paying $0 Per Month on Your Student Loans
The idea of receiving a bill for zero dollars from your student loan servicer may raise eyebrows, but it’s a real option thanks to income-driven repayment plans. These plans determine the payment amount based on what borrowers can afford to pay, rather than their outstanding loan balance. While there are limitations, a $0 payment can be a beneficial choice for many borrowers.
How do I get a Zero Dollar Payment?
To begin, it’s important to note that a $0 payment is available only for federal student loans; private loans do not qualify. Eligible borrowers need to sign up for an income-driven repayment plan. IBR, PAYE, ICR, and SAVE all will work. These plans require payments ranging from 5 to 15% of a borrower’s discretionary income. If the government’s calculation determines that a borrower has no discretionary income, their monthly payment will be $0.
Payments on income-driven repayment plans are recalculated annually, adjusted for inflation and changes in income.
Sherpa Tip: This article treats all of the federal income-driven repayment plans similarly because qualifying for $0 payments and the pros and cons are all identical.
However, it’s worth noting that there are some important differences between these plans.
For starters, if you qualify for a $0 per month payment, REPAYE/SAVE and its generous interest subsidy is often the best choice.
$0 Student Loan Payments vs. Forbearances and Deferments
Qualifying for a $0 payment differs considerably from a forbearance or deferment.
While forbearances and deferments have time limits and usually do not last a year, there are no such restrictions on zero-dollar payments. Borrowers making $0 payments on income-driven repayment plans can continue to do so year after year.
Furthermore, $0 payments can count towards student loan forgiveness. Borrowers on income-driven plans can have their loans forgiven after 20-25 years, and those working in public service can use their $0 payments to qualify for the 120 payments required for public service loan forgiveness.
Downsides to Understand
Despite the benefit of not making monthly payments, it’s crucial to understand that the student loan interest does not vanish.
The loan balance increases with each passing month due to accruing interest. Borrowers should be aware of capitalized interest, where the additional interest is added to the loan balance, leading to interest being charged on the increased amount.
To avoid unnecessary capitalization of interest, borrowers should make sure not to miss any income certification deadlines.
Submitting $0 Monthly Payments
When borrowers have $0 payments, there is no need to send a check or complete additional paperwork each month.
However, for loans without a required payment, borrowers still must remember to certify their income before the lender-imposed deadline.
Are $0 payments too good to be true?
Given the prevalence of student loan scams and unreliable information from loan servicers, skepticism is natural when it comes to $0 payments on income-driven repayment plans like IBR, PAYE, and REPAYE/SAVE.
Fortunately, one of the advantages of federal student loans is the availability of income-driven repayment plans based on borrowers’ income rather than their loan balance.
If the Department of Education determines that a borrower cannot afford monthly payments, they will owe $0 per month. Even unemployed borrowers can be eligible for income-driven repayment plans, with most qualifying for $0 monthly payments. The Department of Education considers factors like family size and location to determine affordability, calculating payments based on the Adjusted Gross Income (AGI) reported on tax returns.
IDR Enrollment Process
While not every borrower can qualify for a $0 payment, anyone can apply for an income-driven repayment plan.
The process may take a few months to complete, but the initial paperwork can be filled out in approximately 10 minutes. Borrowers can apply through studentloans.gov or submit a paper application to their loan servicer.
Frequently Asked Questions
No, $0 payments are only available for federal student loans.
It depends on the repayment plan selected. On IBR, PAYE, and ICR, interest will continue to accrue.
However, by enrolling in REPAYE/SAVE, borrowers get a subsidy that covers 100% of the unpaid interest each month.
No, there is no need to send checks or set up automatic payments for $0 payments. However, borrowers must remember to certify their income before the yearly deadline.
Yes, by applying for an income-driven repayment plan, borrowers can transition from forbearance or deferment to $0 payments if eligible.
Final Thoughts
Understanding $0 payments on income-driven repayment plans can help borrowers make informed decisions about managing their student loan debt.
While the concept may seem too good to be true, it is a legitimate option for eligible borrowers with federal student loans. By taking advantage of income-driven repayment plans, borrowers can benefit from affordable payments, loan forgiveness opportunities, and a path toward financial stability.
My federal loans are around 134k, I am on an income driven plan, my payment amount is $0. If this continues for 10 years, all will be forgiven? Or I have to wait 20-25 years for all to be forgiven? Also, should I try to make small payments on the interest? I feel like it wouldn’t even make a dent. Thank you.
Based on your balance, it sounds like IDR forgiveness will take 20 or 25 years… not 10. The ten year forgiveness options are limited to borrowers with small balances and PSLF borrowers.
If you are on the SAVE plan, the government will cover the unpaid interest. Additionally, I’m of the opinion that it usually doesn’t make sense to pay extra when you receive the subsidy.
Should I pay on the unsubsidized? Half are subs and half are unsubs.
The SAVE subsidy applies to all federal loans on the SAVE plan, not just the subsidized loans. It exists so that your balance doesn’t go up while you are on the SAVE plan, even if you have $0 per month payments.
I just graduated and don’t have to start paying my students loans until October. After using the loan stimulator with my VA survivor income I have $0 monthly payments with 0% interest with IDR. It stated my payoff date is August 2033, but forbearance is 20yrs, making it 2043. The two different dates has me confused, what happens after August 2033? Will the loan be paid off or will I have to continue recertify every year for 20yrs and until 2043? I am also a senior citizen and am 62 yrs old. Thank you foe helping to clarify this for me.
That is confusing. Is your loan balance less than $12,000? If so, you might qualify for IDR forgiveness after just 10 years on the new SAVE plan.
If you have a larger balance and are just starting repayment, it sounds like it would be 20 years before the debt gets forgiven. The good news is that IDR repayment works really nicely with living on social security. Plus, now that borrowers can authorize automatic yearly certification, the path to forgiveness might not be that complicated.
It’s great news about automatic yearly certification. My loan is for approximately 35k and it is confusing that the loan simulator would state a payoff date of only 10 years which is why I asked my question.
Another possiblity is that it is estimating that you will pay off the balance in full after 10 years of payments.
Hi!
I am a new graduate Physician Assistant. I have secured a job with a qualified employer. I am still in the credentialling process. All of my loans are direct federal loans (some direct unsubsidized and direct grad plus) I was wondering a few things.
Should I consolidate my loans and defer the waiting period so I can start PSLF payments earlier?
How do they calculate “0” dollar loan payments? Is it based on what you made last year? Or what my current salary will be?
Thank you!
Great questions Jennifer.
Consolidating to get an early start on time towards PSLF can be a very smart strategy.
As for calculating monthly payments, the standard method is your most recent tax return. If your income has dropped since your last tax return, you are able to document income using recent paychecks.
Hi! I just had a quick question, I want to make sure that I am understanding this correctly. I am currently on a $0 payment plan and have been for about 2 years… as you can imagine my interest has made the amount I owe dramatically increase.
If I start to make payments on the $10,000 interest I owe, this will not change my IBR plan? I went to a loan workshop when I graduated grad school and I may have misunderstood the speaker. She had stated to not make additional payments as this could change the payment plan you are on.
There are reasons you might not want to make payments on that interest. However, making extra payments shouldn’t affect the repayment plan you are on.
I currently have a $0 payment on my IDR… Assuming I recertify on time, what happens to any of the unpaid interest? Will the interest capitalize? Will the interest be forgiven at the end of the cycle? Will it carry over to the following cycle/year? Will the accrual of interest start over in the following cycle? Etc…
Great question.
The interest will capitalize at some point. There are a number of events that can trigger interest capitalization, such as changing repayment plans or missing an IDR certification deadline. This article on capitalized interest should help.
So if I pay $0 during the entire cycle, then recertify on time the interest still gets tacked onto the principle?
If I pay a large sum on the loan at the beginning of a new cycle will it go to interest from the previous cycle first before going toward principle? Sorry for all the questions. Just trying to figure out the best way to attack this debt.
As long as you recertify on time each year, it won’t capitalize.
When you make payments, the payment is first applied to fees, then the outstanding interest, then the remainder (if any) is applied to the principal balance.
If you are paying $0 per month for an extended period, it likely means that you are working towards loan forgiveness. If that is the case, I don’t really see an advantage to paying down the accrued interest. However, you certainly have the option of paying down the interest whenever you want.
Hi! I am a certified teacher, my license is currently expired but eligible for renewal. I currently work at an elementary school as an Exceptional Education Instructional Assistant. My payments in my IBR have just dropped to $0, prior to that they were $205. I’ve been paying on, occasionally been in deferment/forbearance some years, since 1995. Is there a way to get the remainder of my loan forgiven since I have been paying for that long? If not, if I continue to make my previous payment does that payment get applied to the principal first? I have been employed at a qualifying school for the last 5 years but I don’t think I meet the requirements for teacher forgiveness since I am not a classroom teacher and my license is expired. What’s my best course of action? Thanks!
I suspect that the drop in payments is due to the federal interest rate freeze. As of right now, the interest and payment freeze is set to last through December 31st, 2020.
I’d encourage you to investigate the Public Service Loan Forgiveness program. Filling out the PSLF form should let you know if you are eligible and how much progress you have made. The form can be found here: https://studentaid.gov/sites/default/files/public-service-application-for-forgiveness.pdf
Because the PSLF program is such a great deal for borrowers who qualify, I’d investigate that status first.
apparently i’m eligible for $0 payments, what’s the fastest way i could pay off my loan? It’s a small amount & i’m just wondering if i can make multiple ‘payments’ back to back and be done with it
You can absolutely make multiple payments back to back. With federal loans, you are allowed to pay as much as you want, without any prepayment penalties until the loan is eliminated.
So when I fiddle with the loan simulator on studentaid.gov, itll give me a projected date of May 2040 for the IDR plans, but with a $0 payment its always gna be the same amount, so is my debt contingent on a certain timeframe or a certain number of payments?
(My loan is in default but it’s also so old, it’s dropped off my credit report already, & there’s no other specific benefit to doing the 9 payment loan rehab vs IDR as far as I can tell)
Great point. We often talk about forgiveness coming after a certain number of years, but it is actually a certain number of payments before forgiveness is earned.
However, if you are on a $0 payment plan, those $0 payments each month will count.
The important takeaway is to be sure to certify your income on time each year. If you miss a deadline, you may miss out on a month or two worth of $0 payments, which could extend repayment further.
My tax refund was taking all of it wondering wat can I do to prevent this from happening again I tried to apply for hardship but the WOULDNT give me ya being that I’m guessing since the loans are over 10 years old went to collections it’s says my taxes was for non irs debt plz help this has made things very bad for me and my family
I have a $0 payment on my loans can my tax return still be taken to repay the loans
If the loan is current, then there shouldn’t be a reason for them to garnish your return. If you are concerned, you can call your loan servicer to double check to verify that you don’t owe anything on the loans.
Hey there,
Excellent post! I just wanted to post here my current situation so that I can further understand how the future may look for repaying my student loans.
I am a recent graduate with a $31,000 balance in federal loans. I recently submitted my Employment Certification form for PSLF, IDR plan form (under PAYE), and two proofs of income being my recent W2 from the job I started in September as well as my latest pay stub. I received a message from my loan servicer saying that I am required to pay $0 for the year until my next due date in April 2021.
I assume that interest will continue to accrue for the year since I am not required to make a payment, but should I submit payments to, at least, cover the interest that has accrued while I was in school? Is it even worth doing so? I already have my date to re-certify my information for next year but if I re-certify and continue to stay enrolled in PAYE, assuming that next year I will have a dollar amount to pay since I will make a year with my current job, am I paying off the extra interest on the interest as you mentioned in the article?
Generally, I would just like to have some guidance on how I should handle my first year in repayment and going forward. Thanks!
If you are on your way to PSLF, the accused interest would also be forgiven.
Before making any decisions, I’d suggest getting familiar with capitalized interest and how it works: https://studentloansherpa.com/federal-student-loans-capitalized-interest/
Hi
I have a Income base loan and the payment is $0 monthly
but I want to pay it down. I’ll say first off I’m very slow on
understanding things and hope for simplified answers so
I can at least hopefully understand. The balance is around
$90000. I want to lower it but not spend a lot of time on interest.
I want to pay down the principle to pay it out but I don’t have the
money to pay nothing more than at the most $50 to 100 a month.
But I’m on disability and my mom is the representative over it. I have
a mental disorder so I need help in social setting things. I have bills
of my own but I want to solve my student loan debt. Even if I filed
for bankruptcy the stress would be too much. I tried working but
the stress of being in a place with a lot of interaction almost led
me to commit suicide. I know I must sound pathetic or something
but I’m racking my head to correct the mistake that I could actually
go to college with my ability. I just can’t keep up with anything.
I just want to know if my payment is at 0 a month can I pay anything
to lower the principle? To pay it off eventually?
I have a couple thoughts:
1) If you are on disability, you may want to investigate disability discharge which could get your loan balance forgiven.
2) As for the $50 to $100 per month that you are able to pay, I suspect most or all of that payment would first be applied to interest. Unfortunately, payments are first applied to interest.
I do not quite understand. If i start the income based repayment plan while still in school and the payment is zero, can i still be borrowing while in school if i am close to my aggregate limit?
Repayment doesn’t normally start until after school, so this issue doesn’t usually come up. What goal are you trying to accomplish by starting repayment while you are still in school?
Hi, hopefully I can still get a response to this. My wife had a 0 monthly payment on hey loans and if I qualify for the same can making something as small as 10 payments increase our credit score?
I have had an IDR payment of $0 for about five years. On my income alone, I still qualify for $0 payment. Since my income will probably always be below poverty level, will I eventually get a loan forgiveness or am I going to have to pay the quickly accumulating interest.
Forgiveness is possible for borrowers on IDR plans: https://studentloansherpa.com/student-loan-forgiveness-programs/#Income_Driven_Forgiveness
Hi Michael,
It seems I have a $0 per month for a 185 month term loan, but I don’t know which one I have.
Once the 185 months are completed, does that mean I am forgiven? If I want to buy
a new car or even used car, will this prevent me from doing so? What about a house?
I also have another issue going on, which is private, so how do I email you privately?
Thank you.
–Alex
Hi Alex,
I have never heard of a 185 month term for a $0 per month loan. The $0 per month payments in this article are regarding Income-Driven Repayment plan payments, and those last for 12 months. At that point the borrower has to certify their income again, and the payments can continue at $0 for another 12 months, depending upon their income.
The toolbox has articles on things like buying a car or house and how they are impacted by student loans: https://studentloansherpa.com/loan-toolbox/
As for a private email, there is a link on the bottom of every page to “ask the Sherpa”. I get a lot of reader email, so I’m not able to respond to every question, but I will give it a shot.
Best wishes
I have 6 figure debt from one masters degree and I’m paying $0 with an IBR (due to lack of employment). I’d like to go back to school (for job training) for another masters. Would anyone lend me money even though I’m already in debt? Thanks!
Your best bet would probably be a graduate PLUS loan. The federal government credit check is far less strict than private lenders and there is no yearly cap on federal borrowing.
I’d suggest reaching out to the office of financial aid at the school you are interested in attending for more details and assistance with funding the program.
If I qualify for 0% payments on IBR for federal student loans, can I still make small payments on the loan to go towards the interest? Would that work?
Yes. You can always make extra payments on your loans. The $0 per month is just the minimum.
The nice part about having the low minimum payment is that it allows you to attack your highest interest rate loans first. This gets the debt eliminated the fastest.
Hi Sherpa, I’m about seven years into paying off my federal loans, and am still paying off the interest. I am on RePAYE and currently have $0 payments due to the fact that my wife and I were both out of work after a move when I last re-certified. Now we are both working, and I do have discretionary income. Am I expected to report this change now, or just wait til my next cert. date? Am I setting myself up for problems down the road by not paying anything while I have $0 payments? I am counting on forgiveness after a set number of payments, and I understand that $0 payments do count, so is there a reason I should make payments now, even if I’m not required to? My credit is pretty good so I’m not super worried on that front, just wondering if there’s something I’m not considering. Thanks!
Great question… this article addresses the issues you bring up here: https://studentloansherpa.com/significant-income-change-mean/
Hey Sherpa,
I just got on the IDR and was floored when they said my monthly payment was 0. I thought there was some sort of mistake.
Reading this, im a little more confident. I intend to finish school, and with this my loans get out of default. That should mean I qualify for Title IV again, right?
And wouldn’t I qualify for deferment when im finally in school again?
If you return to school, you can qualify for an in school deferment again.
I have $0 payment from idr every month and I know the interest goes up and I’ve realized that lately. Can I make a small payment every now and then or twice a month to help myself or will that backfire on me by having them take the $0 away from me? I am just curious if making payments now of Small’s amounts will help or not.
Your monthly payments are based entirely upon you prior income certification. Even if you made very large payments, it would not change things. However, if you are earning more money, you should expect that you payments will go up next time you certify your income for your IDR plan.
I have 6 PLUS loans going back to 1985 that defaulted in ’92. For the past several years, I’ve been on the 0 monthly payment due to my income, or lack thereof. I came into an inheritance this year that would allow me to pay the $67,000 balance in full. I’m a 72 yr old widow & full-time caretaker & guardian for my 66 yr old sister, who I brought to live with me 5 yrs ago when our parents could no long care for her. This directly affects my ability to work & make extra income. My only income is Social Security. Our inheritance is all we have to take care of us going into our senior years & hopefully, avoid a nursing home scenario. I was told that once they find out about the inheritance, they could actually attach my accounts & take it. I’m not trying to get out of this, but I’m hoping Mohela/DOE will allow me to pay the current principal balance plus half the accrued but unpaid interest, assuming the current principal balance is the original default claim of $17,000. Would the “current principal balance” be the original default amount? Can you suggest my best approach?
You can get the loans out of default without having to write a large check. You can go through student loan rehabilitation or federal direct consolidation: more on that here: https://studentaid.ed.gov/sa/repay-loans/default/get-out
Greetings! This thread has been super helpful!
My question might be too vague to answer:
I re-certified my PAYE plan, and my amount due each month increased from $0 to $140 in spite of a raise of only 3% ($1,200) in my annual income. (My post-tax, take home pay has increased by $40 a month.) Is it possible my loan servicer made a mistake? Does it sound like I have missed something outright?
I appreciate your time.
It is possible your servicer made a mistake, but it is also possible that they didn’t.
Did you use your 2016 and then 2017 tax returns for income certification? Is it possible you were not working for the entire year of the first tax return? Generally speaking, this explains many of the jumps people see.
I’d suggest checking out the department of education’s repayment estimator, found here: https://studentloans.gov/myDirectLoan/repaymentEstimator.action That should really help with your number checking.
Hello!!
I am on the REPAYE plan and I have a couple of questions. I am paying $0 a month now and I was wondering if I could pay off a little as I go.
Also I researched a little online, but my situation is a little different. If i marry someone who is not a U.S citizen, who does not have debt and will be making the same income as me, should I sign us both up for the REPAYE plan? I read that I didnt have a choice, but I dont know if this would change my plan somehow, or if I should drop down to the PAYE??
Spousal income is counted when calculating REPAYE payments. Spousal income can be excluded in PAYE calculation, if you file your taxes as married filing separately. Filing taxes this way will result in a lower tax bill, but it can also lower your monthly payments.
A Friend of mine has about 120,000 in debt (Direct sub and unsub federal loans) and is only paying $10 a month through PAYE. Her salary per year is 39,000. How is this possible?
Payments are based upon what you make rather than what you owe on PAYE. If your friend recently received a raise, or has a low discretionary income, it is definitely possible to only be paying $10 per month.
This makes sense! As I was calculating my own payments I forgot to focus on my discretionary income. Thank you!
I graduated this year and applied for an Income Based Payment plan and submitted my most recent taxes which were from last year when I wasn’t working which gave me $0 monthly payments? I started working 3 mos ago, was I suppose to submit check stubs?
I’ve had this conversation with my loan servicer. I was told that the tax return was fine and that subsequent income would just be picked up in future tax returns.
Hi! I have a question about this… this happened to me too. I started working in October 2018 (graduated grad school in May 2018). Is there a way for me to pay just the interest or something? I definitely can afford a monthly payment and don’t want my debt to increase due to interest on this loan and paying 0.00. I also am wondering that even if i pay $0.00, will these “payments” count towards my PSLF?
Hi Laura,
The payments should count towards PSLF, provided you meet the other requirements, like working for an eligible employer etc.
As for paying extra, you can always pay more than what is due in order to keep the balance lower and get it paid off faster.
It sounds like the big decision for you will be to decide whether you are going after PSLF, where paying extra wouldn’t help, or paying it off as soon as possible, where paying down the interest now is a huge value.
Where can I find the clause or rule in the terms for federal student loan repayment that stipulate a person can directly (voluntarily) reduce loan principle by making payments monthly in excess of what is required in a IDR plan?
For example: If someone is on an IDR plan monthly repayment of zero dollars but receives a windfall and chooses to pay the funds directly toward loan principle reduction for long term interest savings.
It doesn’t really work like that. When you make a payment it goes towards interest first, then principal. If you have a $0 per month plan, the interest is still accumulating on the loan, so that would have to get paid down before the principal. You can always pay extra to pay off the loan faster, but you have to contend with the same interest rate regardless of the payment plan you are on.
To read the full terms of your federal student loan repayment the document you want to see is the Master Promissory Note that you signed.
Dear Student Loan Sherpa…I can’t find this answer anywhere…I have been on income driven repayment for years at $0.00, I have worked at two different non-profits during this time. I have learned about the loan forgiveness program for people who work for non-profits and who have 10 years of qualifying repayment history. The big question is….do my $0.00 income driven “payments” qualify as payments toward the 10 years of repayment history? I would like to think so, but am guessing the government has a loophole somewhere and I’m screwed out of all the past years I have worked and been considered “poverty level” with $0.00 repayment plans each year. Do you know the answer to this? Help please! Thank you
Yes, $0 payments can count towards PSLF… be sure to submit an employer certification form as soon as possible to make sure you meet all eligibility rules
if the borrow has a low income but spouse has a decent income, will it be based off both incomes or just the borrowers?
It will depend upon the repayment plan selected and how you file your taxes. Further details on repayment plans is available here: https://studentloansherpa.com/repayment-plan-options-strategy/
I am on zero stloan payment but MOHELA just ignores that . Fed loan told me they shouldnt. Now they ( Mohela)are threatening to garnish my income ?
Any thoughts ?
Are the MOHELA loans federal or private? The income-driven repayment plans only apply to federal loans.
If they are federal and your loan servicer is wrongly handling the loans, you can file a complaint with the Consumer Financial Protection Bureau. More on that here: https://studentloansherpa.com/file-compliant-student-loan-company/
I know I’m late to this article but I am on the zero a month plan. Been for 5 years now. Can I pay off some of the cheaper loans (have one for 11 dollars, a few for 1000 but the rest are 5k, 13k, etc etc. I owe as of now 62k and it won’t get lower). So if I pay some off will that kill my ibr and they will put me on standard?
When you are on an income-driven repayment plan, there is nothing wrong with paying extra. You won’t lose your repayment plan. It is just based upon your income, not how much you pay towards your loans.
Thank you very much. I’ll be working on paying what amounts I can. At least I can whittle some off so when I have to pay taxes on millions in 20 years it won’t be that bad. I don’t know how I’ll do that. They tax the forgiven loans like income. I make 20k a year and don’t see making much more in 20 years. So it’s just another way they screw the poor.
Yanno, I’m so sorry I dared try to get out of low wage life. If devry would have said initially that the loans would never cover full tuition I would have waited. Now I will be in debt for ever for literally nothing. Not even transcripts to prove I got all A’s and one B. It’s so depressing.
No degree.
Future taxes on whatever my loans will be in 20 years, lets realistically say 750k,called by the irs as “income” that I’ll never see except in typed format, and still making low wage.
Only in the USA can every single citizen go to college and many of them go into huge debt for nothing in return. It needs reforming so so badly.
Sorry to write upsetting things. I figure if maybe another reader sees this and is in the same boat, at least they’ll know they’re not the only one.
Thanks sarra1833. I’m glad to see I’m not the only one in this boat. I have $157,000 from grad student loans for a degree I didn’t finish for medical reasons. Can’t go back either….so I’m looking into public service. Lower income but debt will be forgiven and I won’t have the tax bill. In addition, I did read if your income is low you can get a waiver on the tax bill as well. I know in 20 years mine will be in the millions. I try not to think about it.