Income Driven Repayment Plan Formula

Federal student loan borrowers pay a percentage of their discretionary income 10 15 or 20 depending on the specific income driven repayment plan you choose.

Income driven repayment plan formula. Discretionary income is what you have left after taxes and an allowance for necessary spending such as food and shelter. The complete guide to income driven repayment plans. For graduates whose income is insufficient to pay back their federal student loans the government has created four income driven repayment plans to help make the process more affordable. Generally if a borrower s total student loan debt at graduation exceeds their annual income they will qualify for an income driven repayment plan says mark kantrowitz publisher and vice president.

Anyone who has a relatively high student loan payment compared to their income should know about the various income driven repayment plans available for federal student loans. After making payments for years you will have paid a total of and would receive in forgiveness compared to your current plan where you will pay over the next years. When applying for ibr the government looks at your income family size and state of residence to calculate your monthly payments. Your family size and location.

Income driven plans have features these plans lack like loan forgiveness but consider changing repayment plans if your calculated payment grows too big. Income driven repayment idr plans can lower your monthly payment based on your household income. Income based repayment ibr is a repayment plan available to federal student loan borrowers.