Student Loan Calculator For Income Based Repayment

Student Loan Calculator For Income Based Repayment – Many students and their families get federal student loans to pay for higher education. But how much should you borrow, and which repayment plan is best for you? Use the student loan calculator from the US Department of Education’s Federal Student Aid office called

Let’s say you’ve completed your first year of college and have some loans under your belt. You want to see how your potential loan debt relates to repayment after you graduate or leave school. By using

Student Loan Calculator For Income Based Repayment

, you can get an idea of ​​your typical loan balance based on national data by school type:

Income Driven Repayment Plans 101

What if you’ve finished school and are in the thick of repayments? When you log in, Loan Simulator uses your loan information to recommend repayment strategies that work best for your income and repayment goal.

Uses the options you select and the information you enter to recommend a repayment plan that meets your needs. It can also calculate your adjusted gross income (AGI), which is used to calculate monthly payments under some repayment plans. Without AGI, you may be missing out on some repayment options.

You can skip the guided questions and use the sidebar to quickly enter information and experiment with changing your repayment goals and other options.

Note: It is important to include your AGI to be considered for income-driven repayment plans. These plans are based on the borrower’s income and family size and can result in payments as low as $0. They are also good options for those seeking Public Service Loan Forgiveness (PSLF).

Choosing Income Driven Repayment Vs. Refinancing Student Loans

Personalized results also allow you to compare multiple repayment plans to see which best suits your needs. You can choose up to three repayment plans:

You can use the slider bar on the “Would you like to pay off your loan faster?” option to see how an extra monthly amount or an extra one-time payment can reduce the total amount paid and bring the payment date closer.

Uses this information to choose the repayment plan that meets your target and qualifies for PSLF. It also shows the potential amount of the loan to be forgiven.

Can help you estimate the payments under an income-driven repayment plan and suggest which deferment and forbearance options you can choose to temporarily stop payments on your student loans. no extra cost to you, if you click to make a purchase. Please read full disclaimer for more information. In some cases, you may get a better deal from our advertising partners than you could by using their services or products directly.

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This content is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are solely those of the author.

Income-driven repayment is a major benefit of the federal student loan system. Unfortunately, it is confusing to know which plan to choose. It can be even more confusing if you have drastic changes in income during your career that can impact how your income-based repayment is calculated.

When you graduate, your federal loan is placed on the 10-year Standard Repayment Plan. This plan eliminates your loan in the shortest possible time. The problem is, if you borrow something larger than about a dollar, the amount of your monthly payment tends to be very high.

Therefore, from the early 1990s, the Department of Education introduced income-driven repayment (IDR) plans; the first one was the Income-Contingent Repaymentor ICR plan, which was not the biggest. Today, there are four IDR plans to choose from, including Pay As You Earn (PAYE), Saving on a Valuable Education (SAVE), formerly REPAYE, Income-Based Repayment (IBR), and ICR.

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President Biden’s Department of Education has released details of his new SAVE plan with much more generous repayment terms and student loan forgiveness opportunities.

We’ll walk you through some real examples of how to choose the right student loan repayment plan. You’ll also learn how your payment will change as your income changes using Student Loan Planner’s free repayment calculator. It is the best around. Let’s start with some basics you need to know before entering the numbers into the calculator.

Some student loan borrowers think of “income” as their total salary, while some borrowers think of “income” as what hits their bank account. In the world of student loans, there is only one definition of income that matters – your Adjusted Gross Income or AGI.

This is a specific number on your tax return. In fact, if you dig up your 2022 tax return, it’s line 11 on your Form 1040.

Icr: Income Contingent Student Loan Repayment

How are income-based repayment amounts calculated? It depends on which IDR plan you choose, but there is a general income-based repayment formula calculation you can start with.

1. Start with your AGI. Then, deduct 150% of the federal poverty guideline level for your family size (the new SAVE plan allows you to deduct 225%). This is your discretionary entry into the world of student loans.

2. Once you know your discretionary income, multiply by either 10% for SAVE or PAYE, or 15% for IBR. Undergrad borrowers only can multiply by 5% if on SAVE.

Bonus, our free student loan calculator does all this complicated math for you. I know some readers like to discount like we do, but this is all done by calculator, so all you need to know is your income.

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Now that we know how income is defined, and how income-based repayment is calculated, let’s look at some examples.

Let’s say you’re leaving your MBA with $125,000 of federal student loan debt and are starting a job at the lower end of the spectrum to “learn the ropes.” You anticipate making about $60,000 a year, but you expect your salary to increase drastically quickly – about 7% a year – for the next 10 years.

You are currently single for the sake of simplicity (but we will look at an example of marriage later). Here’s how to grow your income, and your options for student loan payments.

When you graduate, you will automatically be placed on the standard 10-year, monthly student loan payment plan of $1,388 per month. This is painful for a new professional starting with a salary of $60,000.

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Using a 4% interest rate over a 20-year repayment term, you could pay $757 per month by refinancing. You’ll have to qualify for a low refinance interest rate like 4%, so you’ll need good credit or a cosigner.

The most favorable options based on income are REPAYE, PAYE, or IBR. REPAYE and PAYE are both 10% of your discretionary income, versus IBR which is 15% of your discretionary income. We will go with PAYepayment for this scenario. A $339 monthly payment is much more manageable than $1,388.

As you can see with the increase in income, whether that increase is 1% per year or 7% per year, your monthly PAYEpayment increases gradually.

In terms of the total cost of repaying the loan, the standard 10-year plan is the best option, but do you remember the monthly payment? It is $ 1, 388 per month. Yikes.

Student Loan Repayment Calculator Forgiveness Program

Under the PAYE scenario, you’ll start with lower monthly payments of $339/month, and eventually spend $178, 121 repaying your student loans. You would need to save about $100 a month in a taxable brokerage account to save for the tax bomb of about $38,000 over the life of the loan (20-year repayment period).

If we look at today’s dollars, or net present value (NPV), PAYE is the winner, but it is very close to the total NPV under refinancing. This is why repaying your MBA loan can be complicated.

When you understand that you can pay between $165,000 to $275,000 for $125,000 of student loan debt, you should consider paying them back aggressively to avoid as much interest as possible, but there is an argument for PAYE and private financing in this the case.

For future analysis, once Biden’s IDR regulations have come into effect, the analysis for degree borrowers will be whether to pay for 20 years on PAYE / New IBR or 25 years on REPAYE / SAVE.

Student Loan Repayment Calculator Template

In this scenario, our recent MBA graduate marries a nurse making $75,000 a year in 2025. They decide to file their taxes jointly. This changes our landscape of MBA borrowers significantly.

Note that the standard 10-year results and private student loan refinancing remain the same, but the three income-driven repayment options change, drastically. For example, in 2026 under PAYE, our MBA borrower’s payment would jump from $367 to $1,028 by adding their spouse’s income.

PAYE is now the worst case scenario. The loan is off until 2039, but refinancing for a lower interest rate and payment over 20 years is the best option in terms of today’s dollars.

This scenario is a great case for filing your taxes separately. If you file separately, you are allowed to exclude your spouse’s income from calculating your loan payment. It is not suitable for everyone, and you may miss out on some benefits such as:

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In our final scenario, let’s switch gears and look at how your income-based repayment is calculated with a drastic increase in income.

A doctor is completing their residency or fellowship, where their annual income will go from about $50,000 to $225,000 a year. They are working in a non-profit hospital and got married in 2021. This borrower plans to have children starting in 2025.

As you can see, because we are talking about income driven repayment plans, the higher the income, the higher