What IDR payment calculation means

IDR stands for Income-Driven Repayment. It is a way to calculate your federal student loan payment based on how much money you actually earn, rather than how much you borrowed. The payment amount changes each year as your income changes.

The federal government offers four different IDR plans, and each one uses a different formula to turn your income into a monthly payment. You do not calculate this yourself — the Department of Education does it for you once you provide your income information. But understanding how the formula works helps you know what to expect and whether an IDR plan makes sense for your situation.

Key Takeaways

  • IDR payment formulas start with your discretionary income, which is your adjusted gross income minus 150% of the federal poverty line for your family size and state.
  • Each of the four IDR plans (PAYE, REPAYE, IBR, and ICR) takes a different percentage of your discretionary income — ranging from 10% to 20% — to calculate your monthly payment.
  • You must submit your income information to your loan servicer each year, usually through the FAFSA or by filling out an income certification form.
  • If your income is very low or zero, your payment may be $0, but you still owe the loan and interest will accrue unless you are on REPAYE.
  • The Department of Education's Loan Simulator tool lets you enter your income and see what your payment would be under each plan before you choose one.

The discretionary income step

All four IDR plans start the same way: they calculate your discretionary income. This is the number that actually gets multiplied by a percentage to create your payment.

Discretionary income is your adjusted gross income (the number from your tax return) minus 150% of the federal poverty line for your family size and state. The poverty line changes each year, so your discretionary income changes too.

For example, if you are single, live in the continental United States, and your adjusted gross income is $35,000, the 2024 poverty line for a single person is $14,580. Multiply that by 1.5 to get $21,870. Subtract that from your income: $35,000 − $21,870 = $13,130 in discretionary income. If your income is below the poverty line threshold, your discretionary income is $0.

The four IDR formulas and their percentages

Once you have discretionary income, the plan you choose determines what percentage of it becomes your monthly payment. The four plans are PAYE, REPAYE, IBR, and ICR. Each one takes a different slice.

PAYE (Pay As You Earn) takes 10% of your discretionary income. REPAYE (Revised Pay As You Earn) also takes 10% for undergraduate loans but 10% for graduate loans as well. IBR (Income-Based Repayment) takes 10% or 15% depending on when you took out your loans — 10% if you are a new borrower as of October 2007, 15% if you are not. ICR (Income-Contingent Repayment) takes 20% of discretionary income, or calculates a 12-year standard payment and takes whichever is lower.

Using the example above with $13,130 in discretionary income: under PAYE, your annual payment would be $13,130 × 0.10 = $1,313, or about $109 per month. Under ICR, it would be $13,130 × 0.20 = $2,626 per year, or about $219 per month.

How to report your income each year

The Department of Education does not automatically know your current income. You have to tell them. Most borrowers do this by completing the FAFSA each year, which feeds directly to your loan servicer. If you do not complete the FAFSA, you can fill out an income certification form instead and submit it to your servicer.

Your servicer is the company that collects your payments — you can find out who yours is by logging into StudentAid.gov or calling 1-800-4-FED-AID. They will send you a form or a link to an online portal where you enter your income information. You can use your most recent tax return, or if your income has changed significantly, you can provide a recent pay stub or a signed statement of your current income.

If you do not recertify your income each year, your payment may jump to a standard 10-year repayment amount, which is usually much higher. Set a reminder to recertify before your important date — your servicer will tell you when that is.

What happens if your income is very low or zero

If your discretionary income is $0 or negative, your IDR payment is $0. This does not mean your loan disappears — you still owe it, and you are still responsible for it. But you are not required to make a payment that month.

Interest still accrues on most IDR plans. On PAYE, REPAYE, and IBR, unpaid interest gets added to your loan balance over time. On REPAYE only, the government pays half of any unpaid interest for you if you are on time with your $0 payments — this is a significant benefit if you expect low income for a while.

Even when your payment is $0, keep making payments if you can. Any payment you make reduces the balance faster and saves you money in the long run. And if you are pursuing Public Service Loan Forgiveness, you need to be on an IDR plan and making payments (even $0 payments count) to progress toward forgiveness.

Using the Loan Simulator to see your payment before you commit

The Department of Education offers a free tool called the Loan Simulator at StudentAid.gov. You enter your income, family size, state, and loan balance, and it shows you what your payment would be under each of the four IDR plans, plus the standard 10-year plan. You do not have to enter your real name or create an account.

This tool is useful because it lets you compare plans side by side without committing to one. You can see how a $5,000 change in income would affect your payment, or how your payment would look if you got married or had a child (both of which change your discretionary income calculation). Run the numbers for your actual situation before you choose a plan.

Frequently Asked Questions

Does my spouse's income count toward my IDR payment if we are married?

Only if you file taxes jointly. If you file taxes separately, only your income counts. Some borrowers file separately specifically to keep their spouse's income out of the calculation, though this has other tax consequences — talk to a tax professional before doing this.

What if I have both federal and private student loans?

IDR plans only work with federal loans. Private loans have their own repayment terms set by the lender. You calculate IDR for federal loans separately from private loans.

Can I change IDR plans if I realize I picked the wrong one?

Yes. You can switch between IDR plans at any time by contacting your loan servicer. You can also switch back to the standard 10-year plan. There is no penalty for changing, though you should recalculate first to make sure the new plan actually saves you money.

What if my income goes up significantly — do I have to recertify right away?

No. You recertify once per year on the schedule your servicer sets. If your income rises between recertifications, your payment stays the same until the next recertification date. If your income drops, you can request an out-of-cycle recertification to lower your payment sooner.

Does my payment count toward Public Service Loan Forgiveness if I am on an IDR plan?

Yes. Payments under any IDR plan count toward the 120 payments required for PSLF, even if your payment is $0. You must be on an IDR plan to be may be able to access for PSLF in the first place.