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If you’re struggling to afford federal student loan payments, you may be able to lower them with an income-driven repayment plan. Your new monthly payment will be capped at 10%, 15% or 20% of your discretionary income, depending on the plan. Your eligibility will depend on the type of federal loan you have.
Use this calculator to estimate payments under income-driven repayment plans.
Income-based repayment calculator
Source: Health and Human Services Federal Poverty Guidelines for 2022
Discretionary income explained
Discretionary income matters for federal student loans because the Education Department uses it to calculate payments for income-based repayment and other income-driven plans. By accounting for your necessities, discretionary income helps determine how much you could reasonably pay each month. If yours is low enough, your payment may be reduced to $0 a month.
Of course, people have different needs — or things they consider needs. The government isn’t going to have borrowers submit receipts and defend their spending choices. Instead, it uses a standardized discretionary income definition to make things as fair as possible.
How is discretionary income calculated?
To calculate discretionary income for most student loan repayment plans, the Education Department:
Finds the correct federal poverty guideline for your location and family size.
Multiplies that number by 1.5.
Subtracts that number from your adjusted gross income.
Income-Contingent Repayment, which sets payments at 20% of discretionary income, uses 100% of the poverty line instead of 150%.
Adjusted gross income is the amount you pay taxes on. You’ll find it on your most recent tax return on Line 37 if you filed Form 1040; Line 21 on 1040A; or Line 4 on Form 1040-EZ.
Other student loan calculators
Student loan refinance calculator: Compare your current loan payment or multiple payments with a refinanced student loan.
Student loan consolidation calculator: Compare your payments under federal loan consolidation plans with your current bills.
Parent PLUS loans calculator: Estimate your monthly payments on federal direct PLUS loans.
Daily student loan interest calculator: Estimate the amount of interest that your loan accrues daily and between payment periods.
Weighted average interest rate calculator: Determine what the average rate on your current loans is.
Student loan calculator: Determine the monthly payment on new student loans you take out, federal or private.