IDR Student Loan Repayment Calculator

Income-Driven Repayment (IDR) Formula:

\[ PMT = \min\left(P \times \frac{r (1 + r)^n}{(1 + r)^n - 1}, \text{income} \times \text{percentage}\right) \]

Loan Principal (P):

Monthly Interest Rate (r):

decimal

Number of Payments (n):

months

Monthly Income:

IDR Percentage:

decimal (e.g., 0.1 for 10%)

Monthly Payment (PMT):

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1. What is Income-Driven Repayment?

Income-Driven Repayment (IDR) plans cap your monthly student loan payment at a percentage of your discretionary income. These plans can make payments more manageable and may lead to loan forgiveness after 20-25 years of qualifying payments.

2. How Does the Calculator Work?

The calculator uses the IDR formula:

\[ PMT = \min\left(P \times \frac{r (1 + r)^n}{(1 + r)^n - 1}, \text{income} \times \text{percentage}\right) \]

Where:

\( P \) — Loan principal amount
\( r \) — Monthly interest rate (annual rate ÷ 12)
\( n \) — Total number of payments (loan term in months)
\( \text{income} \) — Monthly discretionary income
\( \text{percentage} \) — IDR percentage (typically 10-20% of discretionary income)

Explanation: The calculator compares the standard amortized payment with the income-driven payment and selects the lower amount.

3. Importance of IDR Calculation

Details: Calculating potential IDR payments helps borrowers understand their repayment options, budget effectively, and determine if they qualify for lower payments based on income.

4. Using the Calculator

Tips: Enter all loan details including principal, interest rate, and term. Then enter your monthly income and the IDR percentage (typically 0.1 for 10% plans). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What are common IDR percentages?
A: Most plans use 10-20% of discretionary income. REPAYE/PAYE use 10%, IBR uses 15% (new borrowers) or 10% (old borrowers).

Q2: How is discretionary income calculated?
A: Typically 150% of the poverty guideline for your family size and state is subtracted from your adjusted gross income.

Q3: Are there different IDR plans?
A: Yes, including REPAYE, PAYE, IBR, and ICR. Each has slightly different rules and percentages.

Q4: Does IDR affect total interest paid?
A: Yes, IDR often extends the repayment period, which may increase total interest paid over the life of the loan.

Q5: Can I switch between IDR and standard repayment?
A: Yes, you can change plans annually or when your financial situation changes.