The Department of Education announced Wednesday it is reopening applications for income-driven repayment plans for federal student loan borrowers.

IDR plans allow borrowers to make monthly payments based on their income, aiming to give low-income borrowers an affordable repayment option to help them stay current on their loans.

On Feb. 26, President Donald Trump's administration removed the online application from the Federal Student Aid website and reportedly instructed loan servicers to pause the processing of new IDR applications, according to The Washington Post, in response to the 8th Circuit Court of Appeals' Feb. 18 injunction preventing President Joe Biden's Saving on a Valuable Education IDR plan from rolling out. The Feb. 18 injunction continued a stay on the SAVE plan the 8th Circuit court issued in July 2024.

On March 19, the American Federation of Teachers sued the Trump administration over the IDR application shutdown, claiming the administration misinterpreted the 8th Circuit ruling and illegally blocked borrowers from accessing more affordable monthly payments and making progress toward Public Service Loan Forgiveness. 

AFT and the Student Borrower Protection Center, which is representing the union in its lawsuit, take credit in pressuring the Trump administration to restore IDR applications.

However, the Trump administration maintains it only removed IDR applications to ensure compliance with the 8th Circuit ruling and revisions have now been made "to conform with the ruling," James Bergeron, acting Under Secretary of Education, said in ED's announcement on Wednesday.

"Because the online application incorporated provisions subject to the injunction, it was necessary to revise the form, making it unavailable to borrowers in the interim," ED said in its press release. "Paper loan consolidation applications were available to borrowers during that time."

Now, borrowers can once again apply for one of three repayment plans: income-based repayment, Pay As You Earn and income-contingent repayment. Log in to the Federal Student Aid website or visit your loan servicer's website to apply for any of the IDR plans available to you.

The difference between IBR, PAYE and ICR plans

The best repayment plan will depend on your situation and eligibility.

When you begin paying back your federal loans, you're automatically placed on the standard repayment plan, which gives you a fixed monthly payment that guarantees your loans will be paid off in 10 years. This tends to be the lowest payment available for borrowers with smaller balances or higher incomes. 

But if your payment is too high on the standard repayment plan, an income-driven plan may make sense for you. Here's a breakdown of the available options.

Income-based repayment

All direct subsidized and unsubsidized loans, as well as Family Federal Education Loans, are eligible for income-based repayment. 

On IBR, your monthly payment is calculated as 10% or 15% of your discretionary income, depending on when you took out the loan. Payments are 10% of discretionary income for those who were new borrowers on or after July 1, 2014, and 15% for borrowers who took out loans prior to that date.

For IBR purposes, your discretionary income is the amount you make over 150% of the federal poverty guideline for your location and household size. For a single person in the contiguous U.S., that's $35,213 in 2025.

A new borrower earning $75,000 a year would be expected to pay about $185 a month on IBR, based on CNBC Make It calculations. The amount you pay on IBR will never be higher than what you'd pay on the standard plan, however. 

Income-contingent repayment

Direct subsidized, unsubsidized and consolidated loans are eligible for the income-contingent repayment plan.

On ICR, your monthly payment amount is 20% of your discretionary income or the amount you would pay on a 12-year fixed repayment plan, adjusted using a formula based on your income — whichever is less.

Contrary to IBR, your discretionary income on ICR is any income above 100% of the poverty guideline. 

Pay As You Earn

Borrowers with the same kinds of direct loans eligible for ICR are also eligible for the Pay As You Earn repayment plan.

You must be a new borrower to qualify for PAYE, however. New borrowers fit the following criteria:

• Had no outstanding balance on a Direct or FFEL loan when you received a Direct Loan or FFEL Program loan on or after Oct. 1, 2007
• Must have received a Direct loan — subsidized, unsubsidized or direct PLUS loan — disbursement on or after Oct. 1, 2011 or a Direct Consolidation loan based on an application that was received on or after that day

Monthly payments on PAYE are calculated as 10% of your discretionary income, which is your income over 150% of the poverty guideline. Your payment on PAYE cannot be higher than it would be on the standard 10-year repayment plan.

While PAYE and IBR have similar payment terms, the eligibility requirements may force borrowers to choose one or the other.

Want to earn some extra money on the side? Take CNBC's new online course How to Start a Side Hustle to learn tips to get started and strategies for success from top side hustle experts. Sign up today and use coupon code EARLYBIRD for an introductory discount of 30% off $97 (+taxes and fees) through April 1, 2025.

Plus, sign up for CNBC Make It's newsletter to get tips and tricks for success at work, with money and in life.