Student Loan Repayment Plan Calculator — Compare Options

The level-payment formula used for standard repayment comes from setting the present value of a stream of n equal payments discounted at monthly rate r equal to the principal P, then solving for the payment. Because interest is charged on the outstanding balance, early payments are mostly interest and the principal share grows every month: a 35,000 dollar balance at 5.5 percent over 120 months carries a payment near 380 dollars, of which about 160 dollars is interest in month one and under two dollars in the final month, for roughly 10,600 dollars of total interest. One practical mismatch is that federal loans accrue simple daily interest at rate divided by 365, so a servicer's figures will differ from a monthly-compounding model by a few dollars, and more if payments arrive off schedule. Income-driven plans replace that formula entirely with a percentage of discretionary income, defined as adjusted gross income minus a multiple of the federal poverty guideline for household size - 150 percent under the older IBR rules, with the 2024 guideline for a single person in the contiguous states at 15,060 dollars. A borrower earning 55,000 dollars therefore has about 32,410 dollars of discretionary income and a 10 percent IBR payment near 270 dollars a month. The trap is negative amortization: when the payment is below the monthly interest charge the balance grows, and the forgiven remainder after 20 or 25 years may be treated as taxable income, a liability temporarily suspended by federal legislation rather than permanently removed. Advisers commonly flag a student loan payment above roughly 10 to 15 percent of gross income as a constraint on future mortgage qualification.

Federal lending for higher education began with the National Defense Education Act of 1958, which created the loans later known as Perkins Loans, and expanded through the Higher Education Act of 1965, which established the Guaranteed Student Loan program run through banks and state guaranty agencies. That bank-based structure, renamed the Federal Family Education Loan program, coexisted with the William D. Ford Federal Direct Loan Program created by legislation in 1993 until FFEL originations ended on July 1, 2010 and all new federal lending moved to direct government origination. Fixed statutory rates gave way in 2013 to rates reset each year from the 10-year Treasury note plus a margin, with statutory caps by loan type. Repayment relief tied to earnings developed in parallel. Income-contingent repayment was authorized alongside the Direct Loan program in 1993. The College Cost Reduction and Access Act of 2007 created both Income-Based Repayment, which took effect in 2009, and Public Service Loan Forgiveness, which discharges remaining Direct Loan balances after 120 qualifying payments while working for government or qualifying nonprofit employers. Pay As You Earn followed in 2012 and Revised Pay As You Earn in 2015, each lowering the payment share or broadening eligibility. A further redesign, the SAVE plan announced in 2023, raised the protected income threshold and changed unpaid-interest treatment, and has since been the subject of litigation, so borrowers should confirm current plan terms with their servicer.