The federal government offers borrowers four payment plans based on their income:
Each of these federal student loan repayment plans uses a different formula to calculate your monthly payment, typically either 10 or 15% of your discretionary income. These plans also offer loan forgiveness at the end of the repayment term.
Let’s return to the example from above.
Kate’s adjusted gross income is $31,680. She’s in the REPAYE Plan, which uses 10% of her discretionary income to calculate her monthly payment. Ten percent of Kate’s discretionary income is $3,168, divided by 12, which gives Kate a $264 payment each month.
Discretionary Income Calculator
While borrowers can calculate their discretionary income and monthly payment by hand, they don’t have to. The Federal Student Aid website, studentaid.gov, allows federal student loan borrowers to estimate their monthly payments under the various repayment plans using the Loan Simulator.