Student loan calculator

Compare standard 10-year repayment against an income-driven plan on the same loan. The payment, the forgiveness math, and the tax on a forgiven balance — all on one screen.

How the math works

The standard plan is a fixed-rate amortized loan. The payment is level, and the same formula runs a mortgage or a car loan.

Where P is the balance, i is the monthly rate (annual rate divided by 12), and n is the number of months. On the standard plan the balance always falls, because the payment is built to clear it inside the term.

The income-driven plan ignores the balance entirely. It sets the payment from your income:

That inner figure — adjusted gross income minus 150% of the federal poverty guideline for your household — is your discretionary income. The Income-Based Repayment plan takes 10% of it, split across twelve months, and caps the result at the 10-year standard payment. For a household of one the 2024 guideline is $15,060, so the plan protects $22,590 of income before it charges a cent. Any balance left after 240 qualifying payments — 20 years — is forgiven.

Two numbers decide everything: the standard payment depends on what you owe; the income-driven payment depends on what you earn. When they diverge is when the choice matters.

Worked example

Take a federal direct unsubsidized undergraduate loan of $27,000 at the 2024–25 rate of 6.53% — Scenario D2. On the standard 10-year plan the payment works out to $306.99 a month. Over 120 payments that's $36,839.02 paid, of which $9,839.02 is interest.

Now put the same borrower on Income-Based Repayment, earning the U.S. median individual income of $59,540, household of one. Discretionary income is $59,540 − $22,590 = $36,950. Ten percent of that, over twelve months, is $307.92 — a hair above the standard payment. The plan caps it back at $306.99, the loan clears in the same 10 years, and nothing is forgiven. For this borrower the income-driven plan does exactly nothing.

That is the honest headline. An income-driven plan only lowers the bill when 10% of your discretionary income comes out below the standard payment — which needs either a bigger balance or a smaller income than this. Run the same $27,000 loan at an income under about $40,221 and the payment drops below the $146.92 of monthly interest, at which point the balance stops falling and starts to climb. That is where the plan gets interesting, and where the other calculators go quiet.

When this calculator is wrong

Every income-driven projection here holds your income and household size flat for two decades. Real plans recertify income every year. The moment you earn more, the payment rises and the forgiven balance shrinks — so treat the forgiveness figures as a ceiling on relief, not a forecast. The specific ways the math misleads:

• The balance can grow while you pay on time. When 10% of discretionary income is less than the month's interest, the shortfall gets added to the balance. On the $27,000 loan the interest is $146.92 a month; an income-driven payment below that means the balance climbs every month you stay current. A standard amortization calculator can't show this, because it assumes the payment always covers interest. Ours does.
• Forgiveness is taxed again. The American Rescue Plan Act shielded discharged balances from federal tax only through December 31, 2025. Absent a new law, a balance forgiven under an income-driven plan after that date counts as ordinary income the year it's written off. Forgive $40,000 and, at a 22% marginal rate, that's an $8,800 tax bill in a single year — due in cash, not spread out. Public Service Loan Forgiveness and disability discharges stay tax-free; income-driven forgiveness does not.
• The plan rules here are IBR for newer borrowers. The 10%-of-discretionary-income, 20-year figures match Income-Based Repayment for anyone whose first federal loan was disbursed on or after July 1, 2014. Older IBR terms, PAYE, ICR, and the plans still working through the courts use different percentages and horizons. The shape of the math holds; the constants move.
• Private loans don't qualify. Income-driven repayment and federal forgiveness apply to federal loans only. For a private loan, the standard side of this calculator is the whole story.

What to do with the result

If the two plans land on nearly the same payment, as they do in the worked example, take the standard plan and be done in ten years. There is no discount to chase, and you skip the annual income paperwork and the tax question at the end.

If the income-driven payment comes in well below the standard one, the plan is doing real work on your monthly cash flow — but check the balance-forgiven and tax-on-forgiveness lines before you settle in. A payment that doesn't cover interest buys breathing room now and a lump-sum tax bill later. The practical move is to start setting money aside for that tax the same year forgiveness lands, or to overpay toward the balance in any year your income leaves room. If the numbers point toward forgiveness, the tax on it is a known future cost, not a surprise — plan for it against your marginal bracket.

Common questions

Is standard or income-driven repayment cheaper?

For most borrowers with a typical undergraduate balance and a normal income, the two are close, and standard clears faster with no tax at the end. Income-driven wins on total cost mainly when the balance is large relative to income — often graduate debt — where low payments plus a forgiven remainder beat paying the whole thing down, even after the tax.

What happens if my payment doesn't cover the interest?

The unpaid interest is added to the balance, so what you owe goes up rather than down. This is negative amortization. You stay in good standing and your payments still count toward the 20-year forgiveness clock, but the balance you carry — and the amount eventually forgiven and taxed — grows.

Is student loan forgiveness taxed?

Income-driven forgiveness is treated as federal taxable income for any discharge after December 31, 2025, now that the American Rescue Plan Act exclusion has lapsed. Public Service Loan Forgiveness and total-and-permanent-disability discharges remain tax-free. Some states tax forgiveness separately from the federal treatment.

How is the income-driven payment calculated?

Take your adjusted gross income, subtract 150% of the federal poverty guideline for your household size, and that's your discretionary income. Income-Based Repayment charges 10% of it per year, split monthly, capped at what you'd pay on the 10-year standard plan.

Does this work for private student loans?

Only the standard side. Private loans have no income-driven option and no federal forgiveness, so the standard payment and total interest are the numbers that apply. Refinancing a private loan changes the rate and term, which the standard calculation already covers.