Income Driven Repayment Calculator

Income-driven repayment detaches the federal student loan payment from the balance owed and ties it instead to discretionary income, defined as adjusted gross income minus a multiple of the Department of Health and Human Services poverty guideline for the borrower's family size and state. The multiple is the single largest lever between plans: 225 percent under SAVE, 150 percent under PAYE and both IBR variants, and 100 percent under ICR. The share of that remainder claimed each year is 10 percent under SAVE, PAYE, and post-2014 IBR, 15 percent under pre-July-2014 IBR, and 20 percent under ICR. For a single borrower with 45,000 dollars of AGI on SAVE, the 2024 guideline of 15,060 dollars times 2.25 shelters 33,885 dollars, leaving 11,115 dollars discretionary and a payment near 93 dollars a month. Because that payment is often smaller than accruing interest, balances grow rather than shrink, and the model here compounds unpaid interest into the balance before forgiveness at 20 or 25 years. Two structural caveats matter. First, real plans include interest subsidies and payment caps this simplified projection omits, so it tends to overstate the balance at forgiveness. Second, forgiven amounts under IDR are generally taxable income to the borrower, unlike Public Service Loan Forgiveness, which is tax-free by statute; the American Rescue Plan Act of 2021 excluded student loan discharges from federal income through the end of 2025. Payments assume annual recertification of income and family size - missing that deadline reverts the payment to the standard ten-year amount. Plan availability has changed repeatedly through litigation and legislation, so confirm current terms with the loan servicer.

Income-contingent repayment entered US federal law with the Student Loan Reform Act of 1993, part of the Omnibus Budget Reconciliation Act signed by President Bill Clinton, which created the Direct Loan program and authorized ICR as one of its repayment options. The design drew on income-contingent systems already operating abroad, notably Australia's Higher Education Contribution Scheme introduced in 1989, and on proposals advanced in the United States by economists including Milton Friedman, who argued for human-capital contracts as early as 1955. ICR was little used because its 20 percent formula and 100 percent poverty exclusion produced high payments. The College Cost Reduction and Access Act of 2007 created Income-Based Repayment, effective July 2009, at 15 percent of income above 150 percent of poverty with forgiveness at 25 years, and in the same statute created Public Service Loan Forgiveness at 120 qualifying payments. The Health Care and Education Reconciliation Act of 2010 reduced IBR to 10 percent with 20-year forgiveness for borrowers whose first loans came on or after July 1, 2014. The Department of Education used its regulatory authority to launch Pay As You Earn in December 2012 and Revised Pay As You Earn in December 2015, extending the 10 percent terms to more borrowers. The Saving on a Valuable Education plan replaced REPAYE under rules finalized in July 2023, raising the shelter to 225 percent of poverty and adding an unpaid-interest subsidy. SAVE was subsequently challenged in federal court and enjoined, and Congress has since revisited the IDR structure, so the menu of available plans continues to change.