How Is Income-Based Repayment Calculated: The 10% or 15% Formula

Income-based repayment is calculated by taking a set percentage of your discretionary income and dividing it into twelve monthly payments. The percentage is either 10% or 15%, depending on when you first borrowed, and discretionary income is the difference between your adjusted gross income and 150% of the federal poverty guideline for your family size. The resulting monthly payment is then capped at whatever you would pay under the standard 10-year plan, so IBR never costs you more than staying off it would.¹

Everything else is detail about where those numbers come from and what shifts them.

The Three Numbers That Drive the Formula

Three inputs do the work: your adjusted gross income, your family size, and the federal poverty guideline for a household of that size.

Adjusted Gross Income

Your AGI is the figure on line 11 of your federal Form 1040. It reflects total income after deductions like retirement contributions and student loan interest, but before the standard deduction or itemizing.² The Department of Education usually pulls this directly from the IRS when you authorize the data transfer on the IDR Plan Request form. If your current income has dropped significantly since your last tax filing, you can submit recent pay stubs, employer letters, or bank statements instead. Supporting documents must be dated within 90 days of your application.

Family Size

Family size counts more people than a tax return typically does. It includes you, your spouse if you file jointly, any children who get more than half their support from you, and any other individuals living with you who depend on you for more than half their support for the coming year. Unborn children expected during the certification year also count.¹ A larger family size raises the protected income floor, which shrinks your payment.

The HHS Poverty Guideline

The Department of Health and Human Services publishes updated poverty guidelines each year in the Federal Register, adjusted for changes in the Consumer Price Index.³ For 2026, the guideline for a single person in the 48 contiguous states is $15,960, with $5,680 added for each additional family member.⁴ Alaska and Hawaii use higher amounts. Your servicer applies the guideline for your state of residence.

Working Out Discretionary Income

Discretionary income under IBR is your AGI minus 150% of the poverty guideline for your household. The formula is codified at 34 CFR 685.209 for Direct Loans and 34 CFR 682.215 for FFEL loans.¹ The math, using 2026 numbers for a single borrower in the contiguous U.S.:

Find your poverty guideline. For a single borrower, that’s $15,960. A family of three would use $27,320 ($15,960 + $5,680 + $5,680).
Multiply by 1.5. For a single borrower, $15,960 × 1.5 = $23,940. That’s the protected income the government treats as off-limits for repayment.
Subtract from your AGI. If your AGI is $45,000, your discretionary income is $45,000 − $23,940 = $21,060.

If your AGI sits at or below the 150% threshold, your discretionary income is zero and your monthly IBR payment is $0. You still make no payments, and those months count toward the forgiveness clock just like any other.

10% or 15%: Which Rate Applies to You

The percentage that gets multiplied against your discretionary income depends on your status as a “new borrower.” Federal regulations define a new borrower as someone who had no outstanding balance on any Direct Loan or FFEL loan as of July 1, 2014, or who first borrowed after that date.¹

New borrowers on or after July 1, 2014 pay 10% of discretionary income, with forgiveness after 20 years of qualifying payments.⁵
Borrowers who had a balance before July 1, 2014 pay 15% of discretionary income, with forgiveness after 25 years.⁶

Returning to the single borrower with $21,060 in discretionary income: a new borrower pays $21,060 × 10% = $2,106 per year, or roughly $175.50 per month. An older borrower on the 15% tier pays $21,060 × 15% = $3,159 per year, or about $263.25 per month on the same income.

The Standard-Plan Cap

Your IBR payment is capped at the amount you would owe under the standard 10-year repayment plan.⁷ If the formula produces a payment larger than that standard figure (which can happen as your income rises), you pay the standard amount instead. One practical effect: borrowers earning enough to hit this cap won’t save money by switching to IBR, even though the One Big Beautiful Bill Act removed the old partial financial hardship test and now lets anyone enroll.

How Marriage and Filing Status Change the Inputs

Marriage can shift both the income number and the family size, so it can change your payment substantially.

If you file a joint return, your combined AGI goes into the formula and your spouse counts in your family size. If you file separately, only your individual income is used, and your spouse is generally excluded from the family-size count.⁸ For a borrower whose spouse earns significantly more, filing separately can produce a much lower IBR payment.

The trade-off is a real one. Filing separately usually means losing access to the student loan interest deduction and certain education credits, and it can disqualify you from other tax benefits. Running the numbers both ways is the only way to know whether the IBR savings exceed the tax cost. A high-earning spouse can also push a joint AGI high enough that the standard-plan cap takes over, which erases any benefit from the income-driven formula.

Annual Recertification

Your IBR payment isn’t set once. It recalculates every year based on updated income and family size. The simplest path is granting the Department of Education ongoing consent to pull your tax data from the IRS directly on the IDR Plan Request form; that consent stays in effect until you finish repaying, leave the plan, or revoke it through your StudentAid.gov account.⁹ With consent on file, recertification happens automatically. Without it, you have to submit updated documentation to your servicer every year on your own.

p>Missing the deadline is expensive. Your payment resets to the standard 10-year amount, often hundreds of dollars higher. Any unpaid interest that built up while your IBR payment was below the accruing interest is then capitalized onto your principal, so you begin paying interest on interest.¹⁰ A single missed recertification can add thousands to the lifetime cost of the loan.

What the Monthly Payment Doesn’t Cover

The IBR calculation sets your monthly payment, but it doesn’t necessarily cover the interest accruing on your loans. For many borrowers, especially early on, the formula produces a payment smaller than monthly interest, and the balance can grow. On subsidized loans, the federal government covers 100% of the unpaid interest during the first three consecutive years on the plan. After that, unpaid interest accumulates but doesn’t capitalize as long as you stay on the plan and recertify on time.¹⁰ Unsubsidized loans have no interest subsidy.

The calculation also doesn’t factor in forgiveness directly, but the result of it does. Months where your calculated payment is $0 still count toward the 20- or 25-year forgiveness timeline.¹¹ A low payment today is still a qualifying payment.

1
eCFR. 34 CFR 685.209 – Income-Driven Repayment Plans
2
Internal Revenue Service. Adjusted Gross Income
3
Federal Register. Annual Update of the HHS Poverty Guidelines
4
HHS ASPE. 2026 Poverty Guidelines: 48 Contiguous States
5
Federal Student Aid. Federal Student Loan Program Provisions Effective Upon Enactment Under the One Big Beautiful Bill Act
6
eCFR. 34 CFR 682.215 – Income-Based Repayment Plan
7
Federal Student Aid. One Big Beautiful Bill Act Updates
8
Federal Student Aid. 4 Things to Know About Marriage and Student Loan Debt
9
Federal Student Aid. Consent – Income-Driven Repayment Plan Request
10
Consumer Financial Protection Bureau. When You Make Student Loan Payments on an Income-Driven Plan, You Might Be in for a Payment Shock
11
Federal Student Aid. Student Loan Forgiveness (and Other Ways the Government Can Help You Repay Your Loans)