1. What is Income-Based Repayment?

Income-Based Repayment (IBR) is a federal student loan repayment plan that calculates your monthly payment based on your income and family size. It typically sets payments at 10-15% of your discretionary income.

2. How Does the Calculator Work?

The calculator uses the simple IBR formula:

Where:

• \( Income \) — Annual income in USD
• \( percentage \) — IBR percentage as decimal (e.g., 0.10 for 10%)
• \( PMT \) — Monthly payment in USD (annual calculation divided by 12)

Explanation: The equation calculates your annual payment obligation based on your income and the specified percentage, then divides by 12 for the monthly amount.

3. Importance of Payment Calculation

Details: Understanding your potential IBR payments helps with financial planning and determining if this repayment plan is right for your situation.

4. Using the Calculator

Tips: Enter your gross annual income and the IBR percentage (typically 0.10 or 0.15). The calculator will estimate your monthly payment under this plan.

5. Frequently Asked Questions (FAQ)

Q1: What counts as income for IBR?
A: Generally, your Adjusted Gross Income (AGI) from your tax return is used, plus any untaxed income.

Q2: How often do I need to recertify my income?
A: Typically annually, though you can recertify if your income changes significantly.

Q3: Are there different IBR percentages?
A: Yes, newer borrowers typically pay 10% of discretionary income, while older plans may use 15%.

Q4: What's considered discretionary income?
A: For IBR, it's the difference between your income and 150% of the poverty guideline for your family size.

Q5: Does this calculator account for family size?
A: This basic version doesn't, but family size affects your actual IBR payment by changing the poverty guideline calculation.