Income-Based Repayment (IBR) Calculator
Estimate your monthly federal student loan payment based on discretionary income.
*Your payment is capped at the Standard 10-Year Repayment amount.
Understanding Income-Based Repayment (IBR)
Income-Based Repayment (IBR) is one of several income-driven repayment (IDR) plans offered by the Department of Education for federal student loans. It is specifically designed to make your monthly student loan payments more affordable by basing them on your income and family size rather than your total debt balance.
The calculation is primarily based on your Adjusted Gross Income (AGI) and the Federal Poverty Guideline for your state and family size. The amount you pay is a percentage of your "discretionary income," which is the difference between your AGI and 150% of the poverty guideline.
How the Calculation Works
To determine your IBR payment, we follow these steps:
- Find the Poverty Guideline: We use the current U.S. Department of Health and Human Services guidelines.
- Calculate 150% Threshold: We multiply the poverty guideline by 1.5.
- Determine Discretionary Income: We subtract that 150% threshold from your AGI.
- Apply the Percentage: If you are a "new borrower" (on or after July 1, 2014), the rate is 10%. For older borrowers, it is 15%.
- Divide by 12: This gives your monthly installment.
Realistic Example
Imagine a single borrower living in Ohio with an AGI of $50,000 and $40,000 in student loans.
- 2024 Poverty Guideline (1 person): $15,060
- 150% of Poverty Guideline: $22,590
- Discretionary Income: $50,000 – $22,590 = $27,410
- Annual IBR Payment (10%): $2,741
- Monthly IBR Payment: $228.42
Key Eligibility Factors
To qualify for IBR, your calculated IBR payment must be less than what you would pay under a Standard 10-Year Repayment Plan. If your income increases significantly later in life, your payment will be capped at the amount you would have paid under that original 10-year plan when you first entered IBR.
Pros and Cons of IBR
Pros: Payments can be as low as $0 if your income is near the poverty line. After 20 or 25 years of qualifying payments, any remaining balance is forgiven (though this may be taxable).
Cons: Because payments are lower, you may pay more in interest over the life of the loan. If your payment doesn't cover the accruing interest, your loan balance could actually grow.