How income-driven repayment (IDR) payments are calculated
Step 1: Discretionary income
For IBR, discretionary income = AGI − 150% of the federal poverty guideline for your family size and state. The poverty guideline rises with family size, so a larger household shields more income. For a single borrower in the contiguous U.S., 150% of the poverty line is roughly $23,500, so discretionary income is roughly your AGI above that figure.
Step 2: Apply the plan percentage
IBR charges 10% of discretionary income for new borrowers (no federal balance as of July 1, 2014) or 15% for older borrowers, divided by 12 for the monthly amount. RAP works differently: it applies a sliding 1–10% to your total AGI (not just the discretionary portion), reaching 10% above about $100,000, then subtracts $50 per dependent child.
Step 3: Apply the cap (IBR only)
IBR’s monthly payment can never exceed the standard 10-year payment on your balance. This cap is why high earners with moderate balances often pay less on IBR than on RAP, which has no cap.
What raises or lowers your payment
| Lever | Effect on payment |
|---|---|
| Higher AGI | Higher payment |
| Larger family size | Lower (more income protected) |
| Filing separately (MFS) | Usually lower IBR payment (excludes spouse income) |
| Pre-tax 401(k)/403(b)/HSA | Lowers AGI → lower payment |
| RAP per-child reduction | −$50 per child per month |
Why total cost is not the same as monthly payment
A low monthly payment can still mean a high lifetime cost if interest outpaces it (IBR), or a low one if interest is waived (RAP) or the balance is forgiven (PSLF). To compare plans honestly you need monthly payment, total paid, and projected forgiveness together. See our methodology for the exact formulas.
Frequently asked questions
What is discretionary income for student loans?
For IBR it's your AGI minus 150% of the federal poverty guideline for your family size and state. Your income-driven payment is a percentage of that adjusted figure, not of your full salary.
How does family size lower my payment?
A larger family size raises the poverty-line amount protected from your AGI, which lowers your discretionary income and therefore your IBR payment. RAP instead reduces the payment by $50 per dependent child.
Why is my RAP payment based on total income but IBR isn't?
By design. RAP applies its 1 to 10% rate to your total AGI with no poverty-line deduction (but a $50-per-child reduction and no cap). IBR applies 10 to 15% only to discretionary income and caps the result at the 10-year standard payment.
How can I lower my IDR payment legally?
Lower your AGI, for example through pre-tax retirement (401(k)/403(b)) or HSA contributions, claim your correct family size, and if married, evaluate filing separately. Each reduces the income your payment is based on.
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