Discretionary Income Calculator for 2025 (with SAVE Plan)

Our discretionary income calculator below (fully updated with the latest poverty line numbers) will show you your discretionary income for 2026.Income-driven repayment plans like IBR and PAYE exclude 150% of the federal poverty line from your income before calculating your payment.Unlike IBR and PAYE, the new Repayment Assistance Plan (RAP) doesn't use discretionary income to calculate monthly payments.Instead, RAP bases payments on your adjusted gross income (AGI), with a $50 monthly payment reduction per dependent child.

2026 Discretionary Income (IBR/PAYE) To calculate your IDR payment, take the number above and multiply by 10% if you're on PAYE or new IBR (borrowed on or after July 1, 2014), or 15% if you're on old IBR (borrowed before July 1, 2014).Divide by 12 to get your monthly payment.If you're on RAP, you can use our Repayment Assistance Plan Calculator to estimate monthly payments.Keep in mind if your income has fallen compared to the last time you recertified, you can always recertify early.

How Discretionary Income Works The Discretionary Income Calculator above is completely updated using the latest poverty guidelines that the government publishes every January.Servicers use the Federal Poverty Line to calculate how much income they actually need to pay a percentage of Income-Driven Repayment (IDR) plans.IDR plans like IBR and PAYE charge 10% to 15% of your income above 150% of the federal poverty line.Note that the SAVE Plan is no longer available, and the new RAP plan calculates payments based on AGI rather than discretionary income.

This means RAP borrowers don't receive the same 150% poverty line deduction used under IBR and PAYE.See below for the breakdown of federal poverty line values for the contiguous states in 2026 as well as what 150% of the poverty line looks like for your family size.2026 Federal poverty line values for U.S.contiguous states Family SizePoverty Line Values150% of FPL(Used for IBR/PAYE)1$15,960$23,9402$21,640$32,4603$27,320$40,9804$33,000$49,5005$38,680$58,0206$44,360$66,5407$50,040$75,060Note: For each additional family member, add $5,680 to calculate the poverty line and adjust 150% of FPL accordingly.

Use these numbers when calculating your income-based monthly student loan payments.That link has a calculator that will do it for you.Different Discretionary Income Calculations for Hawaii and Alaska There's slightly different calculations for discretionary income if you happen to live in Alaska or Hawaii.The reason is the poverty line is higher in these two states due to higher costs of living.

For example, the poverty line for a family of 1 in these two states is: Alaska: $19,950 Hawaii: $18,360 For family sizes larger than 1, the poverty line is higher than for the other 48 states for each of Alaska and Hawaii.Take that unique poverty line and multiply by 150%, and the discretionary income deduction for residents of these two states is larger than for most US residents.What is Discretionary Income? Discretionary income is typically defined as what you have left over after you've covered your necessary expenses (like rent/mortgage, groceries, utilities, etc.).Often, this type of discretionary income is contrasted with disposable income, which is your take-home pay after your social security and income taxes have been taken out of your paycheck.

With such a broad definition, it can be difficult to determine exactly what one's discretionary income is.Expenses that one person feels are necessities may seem like luxury items to someone else.The Department of Education needs a concrete way to determine your discretionary income for the purpose of calculating your student loan payments.The federal government created income-driven repayment (IDR) plans because they want payments on federal student loans to be affordable no matter how much you owe.

How does the government figure out what an affordable payment is, though? That's where the discretionary income definition comes in.Historically, IDR plans have used discretionary income to calculate monthly payments.Plans like IBR and PAYE take 10% to 15% of your “discretionary income.” However, the introduction of RAP changes that approach.The government still needs a standardized formula to figure out what they are supposed to charge you.

Rather than excluding a portion of income based on the federal poverty line, RAP calculates payments using AGI, with a $50 monthly payment reduction per qualifying dependent child.Once you know how to calculate YOUR discretionary income, you'll never need to worry or wonder what your IBR or PAYE student loan payments are going to look like ever again.And it gives you a starting point to help compare those costs with RAP's new formula.Discretionary Income Calculation Depends on Your Family Size The discretionary income definition is a technical one, but it's easy to understand.

There are three steps in the calculation.Step 1: Look up the Federal Poverty Line (FPL) for your family size You can find these numbers by searching “federal poverty guideline” or by checking out the numbers over at the ACA Exchange.The contiguous United States and the District of Columbia all have the same poverty guidelines.But if you live in Alaska or Hawaii, it's a bit higher.

Step 2: Multiply the Federal Poverty Line for Your Family Size by 150% You know how when you're doing your income taxes, you get to deduct something from your income? The discretionary income definition is similar.You get to deduct a certain amount of money from your adjusted gross income before the government wants a percentage of it under an income-driven repayment program.Now we'll learn how to calculate that deduction.Take the federal poverty number for your family size and multiply it by 1.5.

That's 150% of the poverty line.Let's look at the father in Virginia with a family size of four.His poverty line number in 2026 is $33,000.Take that number and multiply by 1.5.

His deduction for the purposes of the discretionary income definition is $49,500.For a single person, that deduction would be $15,960 * 1.5 = $23,940.Step 3: Take Your Adjusted Gross Income from the Previous Tax Year and Subtract the Deduction.That's Your Discretionary Income Remember I said steps one and two give you the amount of income that the government won't count in your student loan payment calculation.

Here's how the mechanics of that works.Say the dad from Virginia has a spouse who makes $60,000 per year.He makes $100,000 and has $300,000 of law school loans.Say their combined income on the previous year's tax forms shows $160,000.

To find his annual payment under IBR or PAYE, he would take $160,000 – $49,500 and multiply that by 10%.Divide that number by 12 to get the monthly payment.How to Use the Discretionary Income Definition to Find Out What You'll Pay After Graduation Most people don't make any income while they're in grad school.They might have a working spouse, and if so that will influence the required payments under an income-driven repayment program.

For example, let's say Jane is a graduating med student and her husband Matt is a teacher.Matt makes $50,000 per year, and Jane made $0 last year.Using the discretionary income definition, we first look up the federal poverty line for their family size of two.That is $21,640.

Now we multiply by 1.5 to get $32,460.Take $50,000 and subtract $32,460 to get $17,540 in discretionary income.Now multiply by 10% and divide by 12 to get a monthly payment of about $146.That payment counts for IDR forgiveness and PSLF if applicable.

If you wanted to know how much you'll have to pay on your student loans, use our Income-Based Repayment calculator to see what you would pay on IBR, PAYE, or RAP versus refinancing.How to Use Discretionary Income to Know Your Future Student Loan Payments Your future student loan payments do not need to be a mystery when you know how discretionary income works.Think of discretionary income as if it was a standard deduction for your taxes.It represents the amount of income you can earn before you have to pay anything on your student loans under IBR or PAYE.

So pretend you have to recertify and your servicer pulls your prior year AGI info on your 1040.If you're single, take that number and subtract your discretionary income deduction (150% of FPL for your family size), and multiply the result by 10% if you're on PAYE or new IBR, or 15% if you're on old IBR.Divide by 12 to get your monthly payment.How Does Discretionary Income Affect Student Loan Payments Over Time? Discretionary income changes every year and is dependent upon taxable income, family size, and the government's federal poverty line numbers.

That means student loan payments change every year under IBR and PAYE.The federal poverty line increases over time because of inflation.That means your discretionary income deduction would increase yearly as well, slightly lowering your payments relative to what they'd otherwise be.Keep in mind that for most people with student loan debt, your income would be larger than the poverty line.

Your income would also probably grow at the rate of inflation or potentially more than that.However, if you suffered a pay cut, your student loan payments would decrease.And if you experienced a job loss or any reduction in pay so dramatic that it dropped your income below 150% of your federal poverty guideline, your monthly payment would be $0.But if you aren't making any payments, what will happen to your student loan balance? Under IBR and PAYE, the balance will continue to grow as it accrues unpaid interest.

RAP, however, includes an interest subsidy that prevents unpaid interest from increasing your balance when you make your required monthly payments.Any remaining balance may be forgiven after 20 to 30 years, depending on your repayment plan.Want Help Solving Your Student Loans? We Can Help Optimize Your Payments If you'd rather not do the discretionary income calculation yourself, our team of CFP® and CFA professionals save you a ton of time and probably a lot of money too with a customized student loan plan.Take a look at how our student loan consult service could save you thousands of dollars over the life of your loan payback, especially with all the new rules for IDR plans.