Discretionary income is the number that sets your monthly payment on Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Income-Contingent Repayment (ICR). It’s your adjusted gross income (AGI) minus a multiple of the federal poverty guideline for your family size, and the 2026 guidelines are now in effect.
The new Repayment Assistance Plan (RAP) does not use discretionary income. RAP charges a flat percentage of your AGI, so if you’re deciding between IBR and RAP after leaving SAVE, you need both numbers. This page gives you the discretionary income side, and our RAP calculator gives you the other.
Use the calculator below, or do the math yourself with the 2026 poverty guideline table further down. You can confirm your plan details anytime at StudentAid.gov, and our income-driven repayment overview covers how the plans fit together.
Calculate Your Discretionary Income
We have provided the following discretionary income calculator, updated for the 2026 poverty guidelines. You can also do the math yourself, and it’s the same formula your servicer uses when you apply for or recertify an income-driven plan. The formula for IBR and PAYE is:
Household Income (AGI) – 150% Of Federal Poverty Guideline = Discretionary Income
If you’re calculating your ICR discretionary income:
Household Income (AGI) – 100% Of Federal Poverty Guideline = Discretionary Income
Check out the calculator below. It prints the monthly payment for new IBR and PAYE (10%), old IBR (15%), and ICR (20%). For a RAP payment, use the RAP calculator instead.
Student Loan Discretionary Income Calculator
Results:
What Is Discretionary Income?
Discretionary income, for federal student loan purposes, is the part of your AGI above a set multiple of the federal poverty guideline. It’s a regulatory definition, not the money left over after rent and groceries, and it is spelled out in the Department of Education’s income-driven repayment rule. That rule is also the reason an IBR payment can be far higher than what a borrower feels they have to spare, which is the problem our article on what to do if you can’t afford your student loan payment tackles.
In everyday budgeting, discretionary income is what’s left after necessary expenses like housing, transportation, utilities, and food. The student loan version ignores all of that. Two borrowers with the same AGI and family size have the same discretionary income whether one pays $800 in rent or $2,800, which is why borrowers in high-cost cities feel income-driven repayment pinch harder.
The poverty guideline is the only cost-of-living adjustment in the formula. It rises each January and has separate, higher figures for Alaska and Hawaii, but it doesn’t vary by city. Starting from a low baseline is part of why many borrowers find their discretionary income is larger than expected, which pushes payments above what they’d planned, a pattern we see across every federal repayment plan.
How Discretionary Income Impacts Your Student Loans
To calculate discretionary income for IBR or PAYE in 2026, find the federal poverty guideline for your family size and state, multiply it by 1.5, and subtract the result from your AGI. For ICR, subtract the full guideline instead. If the answer is negative, your discretionary income is $0, and so is your IBR or PAYE payment. Our IBR eligibility article covers who can enroll.
Here are the 2026 guidelines from the Federal Register notice, with the 150% threshold already worked out for the lower 48 states. The same guideline table drives the payment estimates in our student loan calculator.
| Family Size | Lower 48 And DC | 150% (IBR And PAYE) | Alaska | Hawaii |
|---|---|---|---|---|
| 1 | $15,960 | $23,940 | $19,950 | $18,360 |
| 2 | $21,640 | $32,460 | $27,050 | $24,890 |
| 3 | $27,320 | $40,980 | $34,150 | $31,420 |
| 4 | $33,000 | $49,500 | $41,250 | $37,950 |
| 5 | $38,680 | $58,020 | $48,350 | $44,480 |
| 6 | $44,360 | $66,540 | $55,450 | $51,010 |
| 7 | $50,040 | $75,060 | $62,550 | $57,540 |
| 8 | $55,720 | $83,580 | $69,650 | $64,070 |
| Each Additional Person | +$5,680 | +$8,520 | +$7,100 | +$6,530 |
Here’s the math for a single borrower in the lower 48 states with $50,000 in AGI. The 150% threshold for a family of one is $23,940, so discretionary income is $26,060. On new IBR or PAYE, 10% of that is $2,606 a year, or about $217 a month. On old IBR, 15% works out to about $326 a month. On ICR, the threshold drops to $15,960, discretionary income rises to $34,040, and 20% is about $567 a month, which is why we tell borrowers to treat ICR as a last resort in our Income-Based Repayment overview.
The 2026 update moved the numbers a little in your favor. The single-person guideline rose from $15,650 to $15,960, which lifts the 150% threshold by $465 and trims a 10% IBR payment by about $4 a month. If your servicer calculated your payment on the 2025 figures, the difference shows up at your next income recertification.
How Discretionary Income Impacts Your Student Loans
Discretionary income is the only input, besides your plan’s percentage, that sets your payment on IBR, PAYE, and ICR. Those plans are what we call the secret student loan forgiveness programs, because along with a lower payment, any balance left after 20 or 25 years of qualifying payments is forgiven.
Each plan takes a different cut of discretionary income, and the IBR percentage depends on when you first borrowed. Here’s the current table, with SAVE removed because it no longer exists.
| Repayment Plan | Income Base | Poverty Guideline Deduction | Monthly Payment | Status |
|---|---|---|---|---|
| New IBR (First Loan On Or After July 1, 2014) | Discretionary income | 150% | 10%, capped at the 10-year standard amount | Open to loans made before July 1, 2026 |
| Old IBR (First Loan Before July 1, 2014) | Discretionary income | 150% | 15%, capped at the 10-year standard amount | Open to loans made before July 1, 2026 |
| Pay As You Earn (PAYE) | Discretionary income | 150% | 10%, capped at the 10-year standard amount | Ends no later than July 1, 2028 |
| Income-Contingent Repayment (ICR) | Discretionary income | 100% | 20%, or a 12-year fixed payment adjusted for income, whichever is less | Ends no later than July 1, 2028 |
| Repayment Assistance Plan (RAP) | AGI | None | 1% to 10% of AGI, minus $50 per dependent, $10 minimum | Launched July 1, 2026 |
| SAVE | Discretionary income | 225% | 5% to 10% | Ended July 1, 2026 |
Your discretionary income is calculated on an annual basis. To get your monthly student loan payment, multiply it by your plan’s percentage and divide by 12. The plan rules and the forgiveness clocks behind each one are compared in our best student loan repayment plans page.
For a simple example, say your annual discretionary income is $12,000 and you’re on PAYE. Ten percent of $12,000 is $1,200 a year, so your monthly payment is $100. The same borrower on old IBR would pay $150, and the gap between those two plans is the subject of our PAYE breakdown.
Does RAP Use Discretionary Income?
No. RAP sets your payment as a percentage of your AGI with no poverty guideline deduction, according to our breakdown of how RAP works. The percentage climbs in steps from 1% for AGI between $10,001 and $20,000 up to 10% for AGI above $100,000, then $50 a month comes off for each dependent you claim on your tax return. The lowest RAP payment is $10, so RAP never produces a $0 bill the way IBR can.
That design means the two plans trade places depending on your income and family. Take the single $50,000 earner from above. New IBR charges about $217 a month. RAP charges 4% of $50,000, which is $2,000 a year or about $167 a month, so RAP is $50 cheaper. Now take a single parent with two children and $70,000 in AGI. IBR uses the family-of-three threshold of $40,980, leaving $29,020 in discretionary income and a payment of about $242. RAP charges 6% of $70,000, or $350, minus $100 for two dependents, which is $250. Nearly a tie, and the RAP vs. IBR comparison is where the tiebreakers live.
Those tiebreakers matter more than the monthly number. IBR forgives the balance after 20 or 25 years, while RAP runs 30 years, and payments made on RAP don’t count back toward IBR forgiveness if you switch later. RAP does cover unpaid interest and matches up to $50 of principal each month, which can matter for borrowers whose payments don’t cover interest. Both plans count toward Public Service Loan Forgiveness.
Which Income And Family Size Count?
Your discretionary income starts from the AGI on your most recent federal tax return, not your salary and not your take-home pay. The IDR regulation lets the Department of Education pull that figure straight from the IRS, so pre-tax 401(k) contributions, traditional IRA deductions, and HSA contributions all lower the income your payment is based on. Our married filing separately math shows how much a lower AGI is worth.
If you’re married, filing status decides whose income counts. File jointly and your combined AGI is used. File separately and only your own AGI counts on IBR, PAYE, and RAP, with your spouse still counted in your family size. ICR is the exception: married borrowers who choose to repay jointly under ICR use combined income no matter how they file. A separate return can raise your tax bill, so the filing separately math has to be run both ways before you decide.
Family size, for every plan except RAP, means you, your spouse if you file jointly, children who get more than half their support from you, and anyone else who lives with you and gets more than half their support from you. Children expected to be born during the year you certify count too. RAP ignores family size and instead subtracts $50 a month per dependent claimed on your return, which is covered in our RAP calculator.
How To Reduce Your Student Loan Payment
The fastest way to lower a payment that’s based on discretionary income is to lower the AGI it’s based on. Pre-tax retirement contributions, HSA contributions, and traditional IRA deductions all reduce AGI dollar for dollar, which means $5,000 into a 401(k) cuts a 10% IBR payment by about $42 a month. The married filing separately math works the same way for couples.
Next, make sure your income and family size are current. If your income drops during the year, you don’t have to wait for your annual date. You can recertify your income early, and if you’ve added a child, your family size changes the threshold immediately.
Then confirm you’re on the right plan. Since the One Big Beautiful Bill Act removed the partial financial hardship test, which we covered when IBR eligibility changed, borrowers who were stuck on ICR at 20% can move to IBR at 10% or 15%. For borrowers at the low end, a payment that doesn’t cover interest is normal on IBR, and our article on capitalized interest explains when that growing balance gets added to principal.
Refinancing is the one option on this list that gives up federal protections. It only makes sense for borrowers who don’t want forgiveness, aren’t pursuing PSLF, and have a stable income above the point where an income-driven payment beats the standard payment anyway. If that’s you, our list of the best places to refinance your student loans shows current rates, and our federal interest rate table tells you what you’d be giving up.
Which Plans Still Use Discretionary Income After 2026?
After July 1, 2028, IBR will be the only federal plan that uses discretionary income. PAYE and ICR end no later than that date under the One Big Beautiful Bill Act, and borrowers still on them will be moved to IBR or RAP, as we lay out in our RAP rules page. SAVE, which used 225% of the poverty guideline, ended July 1, 2026.
For anyone who borrows a new federal loan on or after July 1, 2026, discretionary income never enters the picture. Those loans can only use RAP or the new tiered standard plan, which is one of the biggest changes in our student loan overview for the class of 2026 and later.
If you left SAVE this year, your 90-day notice from your servicer sets your deadline to pick a plan. Per our SAVE timeline, notices continue through December 2026 and the last individual deadlines land around March 31, 2027. Borrowers who don’t choose are placed on a standard plan, so run both the discretionary income math here and the RAP math before your date.
Final Thoughts
Discretionary income decides what you pay on IBR, PAYE, and ICR, and the 2026 poverty guidelines are the numbers to use right now. Run the calculator above to get your discretionary income, then check it against the RAP calculator if you have the choice between plans.
Remember, if you have any questions, you can contact your student loan servicer or log in at StudentAid.gov. For the full picture of how a payment fits into your total repayment cost, our student loan calculator runs the long-term numbers, and our walkthrough of how to use a student loan calculator walks through what to enter.
If you’re not sure where to start, consider hiring a financial planner who specializes in student loans. We recommend The Student Loan Planner to help you put together a plan for your student loan debt, especially if your decision involves filing separately or a forgiveness timeline.
FAQs
Is Discretionary Income Based On Gross Income Or Take-Home Pay?
Neither. Discretionary income for student loans starts from the adjusted gross income on your federal tax return, then subtracts 150% of the poverty guideline for IBR and PAYE or 100% for ICR. Taxes withheld, rent, and other bills don’t factor in, which is why borrowers in expensive cities feel the pinch our article on affording a student loan payment covers.
What AGI Gives A $0 IBR Payment In 2026?
A single borrower in the lower 48 states pays $0 on IBR or PAYE in 2026 if AGI is $23,940 or less. For a family of four, the cutoff is $49,500. RAP has a $10 minimum payment, so it never drops to $0, one of the differences in our RAP vs. IBR comparison.
Does My Spouse’s Income Count Toward My Discretionary Income?
Only if you file a joint return. If you file separately, IBR, PAYE, and RAP use just your AGI, and your spouse still counts in your family size. ICR uses combined income if you and your spouse choose to repay jointly, regardless of filing status. The tax cost of filing separately is in our married filing separately math.
Does Child Support Or Alimony Change My Payment?
Only to the extent it changes your AGI. Alimony from agreements made after 2018 isn’t taxable income to the recipient, and child support never is, so neither shows up in discretionary income unless it changes what’s on your return. If it does, update it at your next income recertification.
Can Parent PLUS Borrowers Use Discretionary Income Plans?
Parent PLUS loans had to be consolidated to get into ICR, and that was the only income-driven option. RAP doesn’t accept Parent PLUS loans or consolidation loans that include them. If you’re on ICR with a consolidated Parent PLUS loan, ICR ends no later than July 1, 2028, so check with your servicer about moving to IBR before then, and read our Parent PLUS options first.
Can I Lower My Discretionary Income Without Earning Less?
Yes. Anything that lowers AGI lowers discretionary income, including pre-tax 401(k) or 403(b) contributions, traditional IRA deductions, and HSA contributions. Married borrowers can also change whose income counts by filing separately, which is worth the tax math in our filing separately article.
Editor: Clint Proctor Reviewed by: Chris Muller
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