IBR vs. PAYE vs. SAVE: Which IDR Plan Is Best for Medical Residents?

When learning about PAYE, IBR, and SAVE as you try to understand repayment for income driven plans, these three plans limit monthly payments based on discretionary income and provide eventual forgiveness. But they differ greatly and can save or cost tens of thousands as you go through training.

The Short Version

Most current residents usually SAVE is best as the interest subsidy prevents the balance from growing when payment is insufficient to cover interest. PAYE or IBR also works for some special cases too, so it's good to know all three.

How Each Plan Calculates Your Payment

Each of the three plans bases payments on disposable income but defines it differently:

SAVE (Saving on a Valuable Education)

• defines disposable income as AGI less 225% of poverty level;
• for undergraduate loans SAVE uses a rate of 5 percent of disposable income and for graduate loans 10 percent (most medical loans are graduate loans).
• Payments are thus lower for most residents compared to PAYE or IBR.

PAYE (Pay As You Earn)

• specifies disposable income as AGI less 150 percent of poverty level;
• PAYE rate is 10 percent disposable income
• capped at standard repayment of 10 years.

IBR (Income-Based Repayment)

• For borrowers who entered later after July 1, 2014, disposable income is AGI less 150 percent of poverty level and payment rate is capped at standard 10 years repayment at 10 percent of disposable income;
• for others who entered before that date disposable income is AGI less 150 percent poverty level and repayment capped at 10 years at 15 percent disposable income.

Running the Numbers for a Typical Resident

Let's consider a first year resident in Internal Medicine who earns $62,000 annually and is single and childless with $250,000 in federal loans. For singles in 2024 the federal poverty level is $15,060.

Under SAVE Plan: Monthly disposable income is $62,000 minus 150% of $15,060 which equals $62,000 minus $22,590 which is $39,410. Monthly payment is 10% of this, which is about $234.

Under PAYE Plan: Monthly disposable income is $62,000 minus 225% of $15,060, this equals $62,000 minus $33,885, which is $28,115. Monthly payment is 10% of this amount, which is about $328.

Under IBR (for new borrowers) as well, the calculation is the same as PAYE, about $328 a month.

For married residents where the spouse does not work monthly payments are lower due to reductions in family size.

The Interest Subsidy: SAVE's Biggest Advantage

SAVE has a clear feature: if monthly payments are less than the accumulated interest, then the government makes up the difference. Thus your balance won't increase. Consider a loan of $250,000 at 7. 05 percent interest. Interest accumulates to about $1,469 monthly. Under SAVE someone who pays $234 a month ends up owing $1,235. Previously this $1,235 would have grown and eventually accumulate to the loan balance. Under SAVE that $1,235 is covered by the government.

This is very important. People on PAYE or IBR can see their balances increase by $30,000 to $50, 000 over three years while paying. But with SAVE the balance stays stable or barely moves at all.

A key caveat as of 2025 is that subsidies for SAVE interest are facing legal challenges and legal fights have blocked parts of the SAVE plan. This feature might be suspended during court battles, so check studentaid.gov for current status before making any enrollment decisions.

Forgiveness Timelines: When They Diverge

Residents who want to apply for PSLF have exactly the same timeline for loan forgiveness regardless of the IDR plan: 120 qualifying payments to qualifying employers. IDR plans don't affect whether one qualifies for PSLF.

However, forgiveness tied to plans varies:

SAVE:

• forgives after 20 years for people with only undergraduate loans;
• after 25 years for people with any graduate loans including residents.

PAYE:

• forgives after 20 years regardless of loan type,
• PAYE has this advantage compared to SAVE for those not interested in PSLF.

IBR:

• forgives after 20 years for new borrowers
• and 25 years for older borrowers.

This is important for those who do not pursue PSLF who have large enough balances that after forgiveness in year 20 or 25 becomes a realistic strategy. Most doctors find that aggressive repayment or PSLF is a better choice than waiting 25 years for forgiveness with IDR but there are some cases where a 20 year timeline is important.

PAYE Eligibility: The Catch

Eligibility for PAYE has some limitations. You must have been a new borrower as of October 1, 2007 and received loan disbursement after October 1, 2011. If you took out your first Federal loans for undergrad and also your medical school loans and they are covered then you are likely eligible. If you have older loans check out studentaid.gov to verify eligibility. Neither PAYE nor SAVvy or IBR has any such limitations.

Spousal Income and Family Size

Each of the three plans calculates income differently depending on whether you file taxes as a joint return with your spouse or separately.

For joint filers, income of your spouse is taken into account in the calculation. Payments are much higher if your spouse earns a high income. For separate filers only income from you is considered and you miss some benefits (such as deduction for student loans and possible advantage of being married).

People who work and have spouses can save monthly IDR payments by $300 to $600 by filing Married Separate (MFS). That might more than offset the disadvantage of filing separately at tax time. Yearly review with a CPA who is familiar with physician finances is worthwhile at tax time.

Which Plan Should You Choose?

Choose SAVE if:

• you wish to minimize monthly payments during residency
• and if you are concerned that this will cause your debt balance to grow especially if unsubsidized interest is likely to be contested;
• this is your first time calculating this.

Choose PAYE if:

• you do not intend to use IDR for a long time and the difference in timeline for forgiveness is important to your strategy;
• you are willing to pay more per month to reduce countdown to forgiveness;
• your balance range makes a noticeable difference mathematically.

Stick with IBR if:

• you took out loans before PAYE became available and are no longer eligible for PAYE;
• you are unwilling to switch from SAVE because of litigation uncertainty and PAYE is not available anymore;
• IBR is your only IDR option.

Otherwise, go with standard plan or refinance if:

• you do not pursue PSLF and your salary as an attending physician is high at more than $400, 000;
• you want to get rid of this debt quickly and math of IDR forgiveness does not work for you.

The SAVE Litigation Situation

SAVE is currently facing legal challenges. Courts have blocked provisions for both interest subsidies and parts of the timeline for forgiveness. Borrowers who have signed up for SAVE are likely to be placed in forbearance by servicers pending further litigation.

If you are currently enrolled in SAVE and also want to use Payday Forgiveness Loan (PSLF) check with your servicer whether months spent in administrative forbearance during ongoing litigation count toward qualifying payments. There are still open questions about policy.

Things may have changed by the time you read this; always check current status at studentaid.gov before doing anything like registering or changing programs. Want to know how PAYE, IBR and SAVE work with your actual balance and income? Use MedDebt's calculator and compare them side by side: you can see what your monthly payment would be and how much you would pay throughout loans. Data sources: information on Income Driven Repayment plans from Federal Student Aid (studentaid.gov); Final SAVE rule from Department of Education and 2024 poverty guidelines and Higher Education Act eligibility from Department of Health and Human Services.