Income-Based Repayment (IBR) Student Loan Calculator
Your Loan and Income Details
Your Estimated Monthly Payment
Understanding Income-Based Repayment (IBR) for Student Loans
Income-Based Repayment (IBR) plans are designed to make student loan payments more manageable by tying your monthly payment amount to your discretionary income. This is particularly helpful for borrowers who may have struggled with their loan payments due to lower earnings or high debt. Several IBR plans exist, including the Saving on a Valuable Education (SAVE) plan, Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE). While the specific percentages and eligibility criteria can vary slightly, the core principle remains the same: your payment is based on your income and family size.
How is the Monthly Payment Calculated?
The calculation for most Income-Based Repayment plans generally follows these steps:
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Calculate Discretionary Income: This is the difference between your Adjusted Gross Income (AGI) and 150% of the federal poverty guideline for your family size and state.
Discretionary Income = AGI – (1.50 * Federal Poverty Line)
Note: For the SAVE plan, the poverty guideline multiplier is 225% (2.25) for undergraduate loans and 150% (1.50) for graduate loans, but for simplicity in this calculator, we use a general percentage. Also, if your AGI is less than 150% of the poverty line, your discretionary income is considered $0, resulting in a $0 monthly payment for most plans. - Determine the Payment Percentage: Each IBR plan has a set percentage of your discretionary income that will be your monthly payment. Common percentages include 10%, 15%, or 20%. The SAVE plan, for example, generally uses 10% for undergraduate loans and 5-10% for graduate loans. This calculator uses a general percentage selection.
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Calculate the Monthly Payment: Multiply your discretionary income by the repayment plan percentage.
Monthly Payment = Discretionary Income * Repayment Plan Percentage -
Annual to Monthly Conversion: The calculated annual payment is then divided by 12 to get your estimated monthly payment.
Estimated Monthly Payment = (Monthly Payment * 12) / 12 (Simplified: Monthly Payment is the direct result of annual discretionary income * percentage)
Example Calculation:
Let's assume:
- Total Student Loan Balance: $45,000
- Your Adjusted Gross Income (AGI): $60,000
- Family Size: 2
- Federal Poverty Line for family size 2 (example): $23,000
- Repayment Plan Percentage: 10% (common for SAVE/modern IBR)
1. Calculate Discretionary Income: $60,000 (AGI) – (1.50 * $23,000) (150% of Poverty Line) $60,000 – $34,500 = $25,500 (Annual Discretionary Income)
2. Calculate Monthly Payment: $25,500 (Annual Discretionary Income) * 0.10 (10% Repayment Plan) = $2,550 (Annual Payment)
3. Estimated Monthly Payment: $2,550 / 12 = $212.50
This estimated monthly payment would be applied to your loans under the IBR plan. It's important to note that these plans often have terms of 20 or 25 years, after which any remaining balance may be forgiven, though forgiveness may be taxable.
Who Should Use This Calculator?
This calculator is beneficial for:
- Borrowers with federal student loans who are struggling to afford their current monthly payments.
- Individuals whose income has decreased or is expected to decrease.
- Those planning their financial future and wanting to understand potential loan payment scenarios.
- Anyone seeking to understand the impact of different IBR plans on their monthly outgoings.
Disclaimer: This calculator provides an estimate based on the information you enter and common IBR plan structures. Actual payment amounts and eligibility may vary. Consult your loan servicer or the U.S. Department of Education for official details and personalized advice.