What an IDR payment is and how it gets calculated

An Income-Driven Repayment (IDR) plan is a federal student loan repayment option that ties your monthly payment to your current income rather than to a fixed amount. Your payment is calculated as a percentage of your discretionary income—the difference between your gross income and a poverty line amount set by the Department of Education. The exact percentage and formula depend on which IDR plan you choose.

The four active IDR plans are PAYE (Pay As You Earn), REPAYE (Revised Pay As You Earn), IBR (Income-Based Repayment), and ICR (Income-Contingent Repayment). Each uses a slightly different formula, but all start with the same basic inputs: your income, family size, and state of residence. The poverty line threshold changes annually, so your payment can shift even if your income stays the same.

Your payment is recalculated once per year when you recertify your income. If your income drops, your payment drops. If your income rises, your payment rises—but it will never exceed what you would pay on a standard 10-year plan, regardless of which IDR plan you use.

Key Takeaways

  • IDR payments are calculated as a percentage of your discretionary income, which is your gross income minus the current year's poverty line for your family size and state.
  • PAYE and REPAYE use 10% of discretionary income; IBR uses 10% or 15% depending on when you took out your loans; ICR uses 20% of discretionary income.
  • You must recertify your income every year, and your payment is recalculated based on your most recent tax return or income estimate.
  • Your IDR payment will never exceed the amount you would pay on a standard 10-year repayment plan, even if the percentage formula produces a higher number.
  • If your income is low enough, your payment can be as low as $0, though interest will still accrue on unsubsidized loans.

The four IDR formulas and how they differ

PAYE and REPAYE both calculate your payment as 10% of discretionary income. The difference is that REPAYE recalculates your payment if you get married and file taxes jointly, while PAYE does not. REPAYE also applies the 10% formula to Parent PLUS loans if you consolidate them into a Direct Consolidation Loan, whereas PAYE does not cover Parent PLUS loans at all.

IBR uses 10% of discretionary income if you are a new borrower as of October 1, 2007, or later. If you borrowed before that date, IBR uses 15% of discretionary income instead. This distinction matters only if you are comparing plans; you cannot switch to the 10% version retroactively.

ICR uses 20% of discretionary income, making it the most expensive of the four plans in most cases. It is rarely chosen voluntarily because the other three plans offer lower percentages. ICR exists mainly as a fallback option for borrowers who do not meet the requirements for the other plans.

How to find your discretionary income

Discretionary income is not the same as adjusted gross income (AGI). To calculate it, start with your gross income—the total you earned before taxes—and subtract the poverty line amount for your family size and state of residence in the current year.

The Department of Education publishes poverty line tables each year, usually in July, for the following fiscal year. These tables vary by state and family size. For example, the 2024 poverty line for a single person in most states is around $15,060, but it is higher in Alaska and Hawaii and varies slightly by state for larger families.

If your gross income is below the poverty line for your family size and state, your discretionary income is zero, and your payment is $0. You still owe the loan, and interest accrues on unsubsidized loans, but you are not required to make a payment that month.

You can find the current poverty line table on the Federal Student Aid website under the Income-Driven Repayment Plans section. The table is updated annually and applies to payments made in the following fiscal year.

Step-by-step calculation example

Suppose you are on PAYE, your gross income is $45,000 per year, you are single, and you live in Texas. The 2024 poverty line for a single person in Texas is $15,060.

Your discretionary income is $45,000 − $15,060 = $29,940. Your PAYE payment is 10% of that: $29,940 × 0.10 = $2,994 per year, or $249.50 per month. This is your calculated payment before the 10-year plan cap is applied.

To check the cap, you would calculate what you would pay on a standard 10-year plan using a federal student loan calculator. If that amount is less than $249.50, your actual payment becomes the lower 10-year amount. If it is higher, your IDR payment of $249.50 applies.

If your income drops to $35,000 the following year, your discretionary income becomes $35,000 − $15,060 = $19,940, and your new PAYE payment is $1,994 per year, or $166.17 per month. You recertify once per year, usually around the anniversary of when you first entered the plan.

What happens if your income changes mid-year

Your IDR payment is locked in for 12 months based on the income you reported during recertification. If your income drops significantly mid-year—you lose a job, take a pay cut, or have a major life change—you can request an income recalculation outside the normal annual window.

You do this by logging into your loan servicer's website or calling them directly and asking for an out-of-cycle recertification. You will need to provide documentation of your current income, such as a recent pay stub, a letter from your employer, or a tax return. Your servicer will review the documentation and recalculate your payment if the change is verified.

If your income rises mid-year, you are not required to recertify until your annual recertification date. Your payment stays the same until then, even though your income has increased.

Income sources that count and do not count

For IDR calculations, gross income includes wages, salary, self-employment income, interest, dividends, rental income, and other taxable income reported on your tax return. It also includes untaxed income such as certain military housing allowances, certain combat pay, and non-taxable Social Security benefits if you are required to file a tax return.

Income that does not count includes Supplemental Security Income (SSI), certain need-based benefits, and income of your spouse if you file taxes separately and are on PAYE or IBR. If you are on REPAYE and file jointly, your spouse's income counts toward your discretionary income calculation, even if they have no student loans.

If you are self-employed, your gross income is your net self-employment income after the self-employment tax deduction. You report this on Schedule C of your tax return, and your servicer will use that figure.

When and how to recertify your income

You must recertify your income once per year to stay on an IDR plan. Your servicer will send you a notice 60 days before your recertification date, usually the anniversary of when you first entered the plan. You can recertify online through your servicer's website, by mail, or by phone.

To recertify, you will need your most recent tax return or an income estimate for the current year. If you have not filed taxes yet, you can provide an estimate based on your current pay stubs or employment situation. Your servicer will verify the information you provide, and your new payment will take effect within 30 days.

If you miss your recertification deadline, your loan will move off the IDR plan and onto a standard 10-year repayment plan. You can reapply for IDR at any time, but you will lose any time you spent on the plan toward Public Service Loan Forgiveness (PSLF) or other forgiveness programs during the gap.

The 10-year payment cap and when it matters

All IDR plans include a safety net: your payment will never exceed what you would pay on a standard 10-year repayment plan. This cap protects borrowers whose income is high enough that the IDR percentage formula produces a payment larger than the 10-year amount.

To find your 10-year payment, use the Federal Student Aid loan calculator on studentaid.gov. Enter your total loan balance and the current federal interest rate for your loan type. The calculator will show you the monthly payment on a 10-year plan.

If your IDR payment (calculated as a percentage of discretionary income) is higher than this 10-year amount, your actual payment becomes the 10-year amount instead. This is rare for borrowers with moderate to high incomes relative to their loan balance, but it can happen if you have a very large loan balance and high income.

Frequently Asked Questions

Can I use last year's tax return to calculate my IDR payment?

Yes. Your servicer will use your most recent filed tax return to recertify your income. If you have not filed your current year's taxes yet, you can provide an estimate based on your current income, and your servicer will verify it against your tax return once you file.

What if my spouse has student loans and we file taxes jointly?

On REPAYE, both your income and your spouse's income count toward your discretionary income calculation, even if your spouse is not on an IDR plan. On PAYE and IBR, you can choose to file separately and exclude your spouse's income, but this may affect your tax situation. On ICR, only your income counts.

Does interest still accrue if my IDR payment is $0?

Yes. If your payment is $0 because your income is below the poverty line, interest still accrues on unsubsidized loans and on the unpaid interest of subsidized loans. The unpaid interest is capitalized (added to your principal) when you leave the IDR plan or when your payment increases enough to cover it.

How often does the poverty line amount change?

The poverty line is updated annually, usually in July, and applies to payments made in the following fiscal year. This means your payment can change even if your income stays the same, because the discretionary income calculation changes.

Can I switch between IDR plans if my circumstances change?

Yes. You can switch to a different IDR plan at any time by contacting your servicer. Your new plan takes effect within 30 days. Switching does not reset your recertification date or your progress toward forgiveness programs, but it does change how your payment is calculated going forward.