1. What is Income-Based Repayment (IBR)?

Income-Based Repayment (IBR) is a federal student loan repayment program that caps your monthly payments at a percentage of your discretionary income. It typically ranges from 10-15% of your income above a certain threshold.

2. How Does the Calculator Work?

The calculator uses the IBR formula:

Where:

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

Explanation: The equation calculates your annual payment obligation and divides it by 12 to get the monthly amount.

3. Importance of IBR Calculation

Details: Calculating 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 annual income in USD and the IBR percentage as a decimal (e.g., 0.15 for 15%). All values must be valid (income > 0, percentage between 0.01-0.20).

5. Frequently Asked Questions (FAQ)

Q1: What is the typical IBR percentage?
A: For most borrowers, it's 10-15% of discretionary income, depending on when you took out loans.

Q2: How is discretionary income defined?
A: It's typically your adjusted gross income minus 150% of the poverty guideline for your family size and state.

Q3: Are there different IBR plans?
A: Yes, there are several versions (IBR, PAYE, REPAYE) with slightly different rules and percentages.

Q4: Does this calculator account for family size?
A: No, this is a simplified calculator. Official calculations consider family size and poverty guidelines.

Q5: How often should I recalculate my payments?
A: Annually, as you must recertify your income each year for IBR plans.