# How to Calculate IBR

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The federal government offers student loan borrowers several repayment plans to choose from. Although student loans default to a payment plan with equal monthly payments for 10 years, students can select a different repayment plan to get a lower monthly payment. One of these, the income based repayment plan (IBR), sets the payment amount as a percentage of the borrower's household discretionary income. Estimate the amount of your monthly payment by using a simple calculation. Your lender will confirm the monthly payment amount when you apply for IBR.

Look up the U.S. Department of Health and Human Services poverty guideline income for your family size and state of residence. For example, if you are married and live in one of the contiguous 48 states, the poverty guideline for your household is \$14,710.

Multiply this amount by 1.5 to calculate the amount of your income that is shielded for use on your basic needs. In this example, the amount is \$22,065.

Look up your adjusted gross income (AGI) from last year's tax return. If you are married, include your spouse's income as well.

Subtract the amount of shielded income for basic needs from your AGI to calculate your discretionary income. For example, if your AGI was \$30,000, your discretionary income is \$7,935.

Multiply this by .15 to calculate the 15 percent of your annual discretionary income that you have to put toward student loans on the income-based repayment plan. In this case, it is \$1,190.25.

Divide the annual payment by 12 to calculate your IBR monthly payment. For example, \$1,190.25 divided by 12 gives a monthly payment of \$99.19.

## Tips & Warnings

• You can only enroll in IBR if the monthly payment on the plan is less than the payment would be on the standard 10 year repayment plan. Estimate that amount using the calculator at the Federal Student Aid website.
• After you enroll in IBR, your monthly payment amount change each year based on the poverty guidelines, your income and family size. You need to submit income documentation each year to adjust your payment.

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