Income-Based Repayment Calculator Formula

Understand the math behind the income-based repayment calculator. Each variable explained with a worked example.

Use the Income-Based Repayment Calculator

Formulas Used

Monthly IBR Payment

monthly_payment = round(discretionary * ibr_pct / 100 / 12)

Annual Payment

annual_payment = round(discretionary * ibr_pct / 100)

Discretionary Income

discretionary_income = discretionary

Variables

VariableDescriptionDefault
annual_incomeAnnual Gross Income ($)45000
family_sizeFamily Size1
poverty_guidelinePoverty Guideline ($)15060
ibr_pctIBR Percentage (%)10
poverty_for_familyDerived value= poverty_guideline + (family_size - 1) * 5380calculated
discretionaryDerived value= max(0, annual_income - 1.5 * poverty_for_family)calculated

How It Works

How Income-Based Repayment Works

IBR caps payments at a percentage of your discretionary income.

Formula

Monthly Payment = (Discretionary Income x IBR%) / 12

Where Discretionary Income = AGI - 150% of Poverty Guideline for your family size.

  • New borrowers (after 2014): 10% of discretionary income
  • Older borrowers: 15% of discretionary income

    • Worked Example

    Single borrower earning $45,000 with 10% IBR rate.

    annual_income = 45000family_size = 1poverty_guideline = 15060ibr_pct = 10
    1. 01Poverty guideline for family of 1 = $15,060
    2. 02150% of poverty = $15,060 x 1.5 = $22,590
    3. 03Discretionary income = $45,000 - $22,590 = $22,410
    4. 04Monthly payment = round($22,410 x 10% / 12) = round($187) = $187

    Frequently Asked Questions

    What is the difference between IBR, PAYE, and SAVE?

    All are income-driven plans. IBR uses 10-15% of discretionary income. PAYE uses 10%. SAVE (formerly REPAYE) uses 10% with additional benefits.

    What happens after 20-25 years?

    Remaining balance is forgiven after 20 years (undergraduate) or 25 years (graduate). The forgiven amount may be taxable.

    Do I have to recertify my income?

    Yes, you must recertify income and family size annually. If you miss the deadline, your payment reverts to the standard amount.

    Ready to run the numbers?

    Open Income-Based Repayment Calculator