How it works
Income-driven repayment caps your federal student loan payment at a share of your discretionary income and forgives whatever balance remains after twenty or twenty-five years, and this calculator estimates both halves. Discretionary income is what you earn above a protected amount tied to the poverty guideline; the plan takes a percentage of that — often 10% — as your annual payment, divided monthly. The calculator then tracks the balance over the forgiveness term at your interest rate. Here is the part that surprises people: when the capped payment is smaller than the interest accruing, the balance grows even as you pay, and the amount forgiven at the end can be larger than what you originally borrowed. A $60,000 balance at a $52,000 income might carry a payment under $300 a month, and after twenty years a substantial sum is forgiven. Two cautions keep the estimate honest. The forgiven amount may be treated as taxable income in the year it is cancelled, so the forgiveness is not entirely free. And the rules shift with policy and plan — SAVE, PAYE and IBR differ in their percentages and protections. Treat this as a planning estimate and confirm your specific plan's terms with your servicer.
Formula
Payment = idr% x (income - protected) / 12 | forgiven = balance grown at rate over term, minus payments
Tips
- When the capped payment is below the interest, the balance grows even as you pay.
- Forgiven amounts may be taxable in the year of cancellation — plan for the bill.
- SAVE, PAYE and IBR differ in percentage and protection — confirm your plan.
- Recertify income every year or the payment resets and interest capitalises.
- Low income can drop the payment to zero, and those months still count toward forgiveness.
Frequently asked questions
- How is income-driven repayment calculated?
- Your payment is a percentage — often 10% — of discretionary income: what you earn above a protected amount tied to the poverty guideline. Divide that annual figure by twelve for the monthly payment. Low enough income can drop the payment to zero while the months still count.
- How much student loan will be forgiven?
- Whatever balance remains after twenty or twenty-five years of qualifying payments. When the capped payment is smaller than the interest accruing, the balance grows even as you pay, so the forgiven amount can exceed what you originally borrowed. The calculator estimates it from your numbers.
- Is forgiven student loan debt taxable?
- It can be — under some rules the cancelled balance is treated as taxable income in the year of forgiveness, producing a one-time tax bill on a large sum. Federal law has waived this in some periods. Plan for the possibility and confirm the current treatment before relying on it.
- What is discretionary income for student loans?
- Your income above a protected amount tied to the poverty guideline — the portion the plan considers available for repayment. Only that slice is multiplied by the plan's percentage, which is why low earners can have very small or zero payments.
- What is the difference between SAVE, PAYE and IBR?
- They differ in the percentage of discretionary income charged, the income protection, and the forgiveness timeline — SAVE is generally the most generous for undergraduates. The rules shift with policy, so use this calculator for a planning estimate and confirm your specific plan's terms with your loan servicer.