Income Driven Repayment Calculator

How Income-Driven Payments Are Calculated

All income-driven repayment plans use the same basic formula: a percentage of your discretionary income divided by 12 months. Discretionary income is your adjusted gross income (from your tax return) minus 150% of the poverty guideline for your family size. The poverty guideline adjusts annually and varies slightly by state, with higher amounts for Alaska and Hawaii.

For example, a single borrower earning $45,000 in 2024 would subtract $22,590 (150% of $15,060 poverty line), leaving $22,410 in discretionary income. Under PAYE or REPAYE at 10%, the annual payment is $2,241, or about $187 per month. Under ICR at 20%, it would double to $374 per month.

Your payment can be $0 if your income is low enough. If you earn less than 150% of the poverty line, your discretionary income is zero or negative, resulting in a $0 payment. These $0 payments still count toward loan forgiveness and PSLF, making income-driven plans far superior to deferment or forbearance if you qualify for forgiveness programs.

Choosing Between PAYE, REPAYE, IBR, and ICR

PAYE is often the best choice for borrowers who qualify. It caps payments at 10% of discretionary income and forgives remaining balances after 20 years. It also caps your payment at the standard 10-year amount, so if your income rises significantly, you never pay more than you would under the standard plan. PAYE requires loans disbursed after October 1, 2007, and no outstanding balance before October 1, 2011.

REPAYE is available to all Direct Loan borrowers regardless of when you borrowed. Like PAYE, it charges 10% of discretionary income, but it doesn't cap your payment if income rises. It also treats spousal income differently—married borrowers filing separately must still include spousal income in REPAYE but not in PAYE or IBR. REPAYE offers a unique interest subsidy: the government pays 50% of unpaid interest on subsidized loans and 50% of interest on unsubsidized loans above your payment.

IBR is similar to PAYE but available to more borrowers. New borrowers (after July 1, 2014) pay 10% for 20 years; older borrowers pay 15% for 25 years. IBR lets married borrowers exclude spousal income if filing separately, unlike REPAYE. ICR is the oldest plan, requiring 20% of discretionary income or a fixed 12-year payment, whichever is lower. It's rarely optimal except for Parent PLUS loans consolidated into Direct Consolidation Loans.

Long-Term Costs and Forgiveness

Income-driven plans reduce monthly payments but often increase total costs because you pay for 20-25 years instead of 10. On a $50,000 loan at 5.5%, the standard plan costs $540 per month and $14,800 in total interest. Under PAYE at $187 per month (for a $45,000 income), you'd pay $44,880 over 20 years, but much of the balance would be forgiven.

The forgiven amount depends on how much your income grows. If your income stays flat, you'll pay less than the original balance and receive substantial forgiveness. If your income doubles, your payments might eventually exceed the standard plan amount, leaving little to forgive. Income-driven plans work best for borrowers with high debt-to-income ratios who expect modest income growth relative to their debt.

Under current law (through 2025), forgiven balances are tax-free. Before 2021 and potentially after 2025, forgiven amounts count as taxable income. A $30,000 forgiveness could generate a $7,500 tax bill at a 25% rate. This "tax bomb" can be managed by saving monthly for the eventual liability or pursuing PSLF, which offers permanent tax-free forgiveness after just 10 years for public service workers.