Income-driven repayment (IDR) generally uses your federal adjusted gross income (AGI), not your take-home pay. Find AGI on Form 1040, line 11, then apply the formula for the specific repayment plan and your family information. Traditional pretax 401(k) deferrals, eligible HSA contributions, and health FSA salary reductions can reduce the income reported for federal tax purposes; Roth 401(k) and other after-tax contributions generally do not receive the same treatment.
Use the official Federal Student Aid Repayment Calculator for an estimate, but treat the amount shown as provisional. Your loan servicer sets the final payment after processing your application and documentation.
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What income number does an income-driven payment use?
For the federal plans covered by the current Federal Student Aid guidance, the starting point is annual adjusted gross income (AGI). The Internal Revenue Service identifies AGI on Form 1040, line 11. AGI is not the same as your paycheck’s net amount after taxes, insurance premiums, loan deductions, or other payroll items.
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Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →Clear out junk files and repair common Windows errorsFree Scan →Take-home pay is what remains after withholding and deductions. It can change because of tax withholding elections, health-plan premiums, commuting benefits, garnishments, or voluntary savings that do not all change AGI. An IDR calculation instead applies the plan’s definition of discretionary income to AGI and then uses the plan’s percentage.
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Your AGI may already reflect several adjustments, including eligible HSA deductions, certain retirement contributions, and the student-loan-interest deduction. Use the AGI printed on the tax return rather than subtracting those items again from the line-11 figure.
How 401(k), HSA, and FSA contributions affect AGI
Traditional pretax 401(k) contributions
Eligible traditional 401(k) elective deferrals are generally made before federal income tax. The IRS says these deferrals generally are not included in Form W-2 box 1 wages and are not reported as wages on Form 1040. Compared with receiving the same compensation as taxable wages, a traditional contribution can therefore lower the income that flows into AGI.
Use the amount actually elected and the tax documents that support it. Do not assume that every workplace retirement contribution is pretax. A contribution described as after-tax, a nonqualified contribution, or another account type may have different treatment.
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Roth 401(k) contributions
Designated Roth 401(k) contributions are included in gross income when contributed. They do not provide the same current-year pretax reduction as traditional deferrals. If you move money from a traditional contribution rate to a Roth rate, your AGI can be higher even when your total retirement savings is unchanged.
Health savings account contributions
Eligible HSA contributions can receive pretax treatment in two common ways: an employer contribution through a cafeteria plan may be excluded from income, or an otherwise eligible individual contribution may be deductible. Eligibility and the contribution method matter. The amount on your tax return or payroll records is more reliable than a simple subtraction from salary.
Because an HSA contribution may already be excluded from wages or claimed as an adjustment, check Form 1040 and supporting forms before calculating. Subtracting the same dollars a second time would understate AGI and produce an unrealistically low payment.
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Health flexible spending account contributions
The IRS states that employees generally pay neither federal income tax nor employment taxes on salary contributed to a health FSA, and employer contributions receive similar treatment. A payroll FSA election can therefore reduce taxable wages compared with receiving that compensation in cash.
FSA amounts are commonly reflected through payroll reporting rather than as a separate deduction you manually enter on Form 1040. Start with line 11 and do not subtract the FSA election again unless your tax documents show that the amount has not already been reflected.
Contributions that should not be assumed to lower AGI
- Designated Roth 401(k) contributions, which are currently included in gross income.
- After-tax 401(k) contributions and other nonqualifying payroll deductions.
- Ordinary checking-account transfers made after you receive your paycheck.
- Amounts that reduce take-home pay but are not excluded from federal taxable wages or allowed as an income adjustment.
Confirm the repayment plan before doing the math
The percentage, income-protection rule, family-size treatment, and other terms depend on the plan. Plan availability also depends on factors such as your loan type and when the loans were first disbursed. Do not apply a percentage from one plan to another.
The current Federal Student Aid descriptions identify these formulas:
| Plan | Income percentage in the cited guidance | Income base | Family or dependent treatment | Payment floor or cap | Eligibility, term, total paid, and forgiveness details |
|---|---|---|---|---|---|
| Income-Based Repayment (IBR) | 10% of discretionary income for newer borrowers; 15% for older borrowers | AGI minus the applicable income-protection allowance | Family size affects the applicable allowance | Not specified in the current Federal Student Aid summary used here | Eligibility depends on loan and borrower history; repayment term, total paid, and forgiveness details vary and are not specified in that summary |
| Pay As You Earn (PAYE) | 10% of discretionary income | AGI minus the applicable income-protection allowance | Family size affects the applicable allowance | Not specified in the current Federal Student Aid summary used here | Eligibility depends on loan and borrower history; repayment term, total paid, and forgiveness details vary and are not specified in that summary |
| Income-Contingent Repayment (ICR) | 20% of discretionary income | AGI minus the applicable income-protection allowance | Family size affects the applicable allowance | Not specified in the current Federal Student Aid summary used here | Eligibility depends on loan and borrower history; repayment term, total paid, and forgiveness details vary and are not specified in that summary |
| Repayment Assistance Plan (RAP) | 1% to 10% of annual AGI, divided by 12 | Percentage of AGI rather than the discretionary-income subtraction used in the formulas above | Subtract $50 for each dependent | Payment cannot be below $10 under the cited description | Eligibility, repayment term, total paid, and forgiveness details are not specified in the current Federal Student Aid summary used here |
The income-protection allowance is not one universal number. It is tied to the applicable plan rules and family size, and it can change as federal guidance changes. Obtain the allowance shown for your plan rather than importing a number from an online example.
Step-by-step calculation workflow
- Identify the plan you are applying for. Check whether your loans and borrower history meet that plan’s requirements. If you are comparing plans, calculate each one separately.
- Collect your latest tax and payroll records. Have Form 1040 line 11, W-2 box 1, traditional and Roth 401(k) elections, HSA records, FSA payroll records, family size, dependent count, and current federal loan balances available.
- Use AGI as the starting figure. Enter the line-11 AGI from the tax year requested by the application. If you use a different income document, follow the application’s instructions and use the documented figure consistently.
- Check that pretax items are already reflected. Traditional 401(k), eligible HSA, and health FSA amounts may have reduced taxable wages before the tax return was prepared. Do not subtract them a second time.
- Calculate discretionary income when the plan requires it. For IBR, PAYE, and ICR, subtract the plan’s applicable income-protection allowance from annual AGI. The allowance depends on the plan rules and family size.
- Apply the plan percentage. Multiply annual discretionary income by 10%, 15%, or 20%, as applicable, and divide by 12 to obtain a monthly estimate.
- Apply RAP’s separate formula if relevant. Multiply annual AGI by the applicable RAP percentage, divide by 12, then subtract $50 for each dependent. The resulting payment cannot be below $10 under the cited Federal Student Aid description.
- Run the official Repayment Calculator. The calculator can import IRS information or accept manual entries and can compare eligible plans, estimated monthly payment, repayment period, total paid, principal and interest, and possible forgiveness.
- Submit the application and wait for servicing. The calculator is an estimate. After the servicer processes your application and supporting information, the servicer’s determination controls the payment amount.
Formulas you can use on a worksheet
IBR, PAYE, and ICR
For a plan expressed as a percentage of discretionary income:
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Estimated monthly payment = plan percentage × (annual AGI − applicable income-protection allowance) ÷ 12
Use 10% or 15% for IBR depending on the borrower’s applicable category, 10% for PAYE, and 20% for ICR. If AGI is below the applicable allowance, the discretionary-income portion may be zero; the servicer applies the plan’s actual rules to the account.
RAP
For RAP, use:
Estimated monthly payment = (applicable RAP percentage × annual AGI ÷ 12) − ($50 × number of dependents)
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The current Federal Student Aid description gives a RAP percentage range of 1% to 10% of AGI and states that the payment cannot be below $10. The percentage that applies to you must come from the plan rules or the official calculator; do not choose a rate simply because it produces a preferred result.
Worked examples with hypothetical numbers
The following examples demonstrate the arithmetic only. The income-protection allowance and RAP percentage are illustrative values, not a promise of what a servicer will use.
Example 1: A 10% plan after pretax contributions
Assume your Form 1040 line-11 AGI is $72,000 after payroll treatment of a traditional 401(k), eligible HSA contributions, and a health FSA election. Assume, solely for illustration, that your applicable income-protection allowance is $30,000.
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- Annual discretionary income: $72,000 − $30,000 = $42,000.
- Annual payment at 10%: $42,000 × 0.10 = $4,200.
- Estimated monthly payment: $4,200 ÷ 12 = $350.
If you had subtracted the 401(k), HSA, or FSA elections again from the $72,000 AGI, you would be using an income figure that is too low.
Example 2: IBR’s 15% category
Using the same hypothetical $72,000 AGI and $30,000 allowance, annual discretionary income remains $42,000. At 15%, the annual amount is $6,300 and the monthly estimate is $525. The difference comes from the plan percentage, not from a change in take-home pay.
Example 3: RAP and dependents
Assume annual AGI of $60,000, two dependents, and an illustrative RAP percentage of 5%.
- Annual percentage amount: $60,000 × 0.05 = $3,000.
- Monthly amount before the dependent adjustment: $3,000 ÷ 12 = $250.
- Dependent adjustment: 2 × $50 = $100.
- Estimated monthly payment: $250 − $100 = $150.
If the calculation produced less than $10, the cited RAP description’s $10 floor would apply.
How a change in AGI changes the payment
For plans based on discretionary income, every $1,000 reduction in annual AGI or in the applicable income base changes the monthly estimate by approximately:
| Applied percentage | Approximate monthly change for each $1,000 |
|---|---|
| 10% | $8.33 |
| 15% | $12.50 |
| 20% | $16.67 |
| RAP at 1% | $0.83 before the dependent adjustment |
| RAP at 10% | $8.33 before the dependent adjustment |
This sensitivity table does not determine eligibility or account for plan-specific floors, caps, or allowances. It simply shows the arithmetic effect of a different income figure.
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Why your paycheck estimate can be wrong
Net pay includes items IDR does not use
A paycheck may deduct federal and state withholding, Social Security and Medicare taxes, insurance premiums, charitable contributions, wage garnishments, and savings transfers. Those deductions can make two people with identical AGI have different take-home pay. IDR does not simply allocate a percentage of either person’s net paycheck.
Payroll labels can be misleading
A line labeled “retirement” does not by itself establish pretax treatment. Confirm whether the account is traditional or Roth and whether a contribution is elective deferral, after-tax, or another category. Likewise, confirm whether an HSA contribution was made through a cafeteria plan or claimed separately.
Tax-return and payroll amounts can represent the same exclusion
Traditional 401(k) and FSA salary reductions are often reflected in W-2 wages before Form 1040 is prepared. HSA contributions may be excluded through payroll or deducted on the return. Compare the documents before making any adjustment so you do not count one tax benefit twice.
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Enter the requested loan and borrower information, then choose IRS import or manual entry. Review the displayed AGI, family size, dependents, loan balances, interest rates, and plan eligibility before accepting the estimate. A calculator result is useful for comparing scenarios, but it is not an approval notice or a binding payment quote.
Use the calculator’s comparison fields to examine estimated monthly payment, repayment period, total paid, principal and interest, and possible forgiveness. A lower first payment can result in more interest or a longer repayment period, so compare the full set of outputs rather than the monthly figure alone.
When you apply, retain the tax return, W-2, payroll contribution records, HSA documentation, and FSA records used for the estimate. If the servicer’s processed amount differs, compare the income year, family size, plan selection, and treatment of each contribution before requesting a correction.
Troubleshooting common calculation errors
- Using take-home pay: Replace net pay with Form 1040 line 11 AGI or the alternative income documentation the application accepts.
- Subtracting pretax items twice: Start with AGI, then verify whether the traditional 401(k), HSA, or FSA amount is already reflected.
- Treating a Roth 401(k) as pretax: Include Roth contributions in the income treatment shown by your tax documents.
- Using the wrong plan percentage: Confirm whether the calculation is IBR at 10% or 15%, PAYE at 10%, ICR at 20%, or RAP’s applicable 1%–10% rate.
- Ignoring family size: Recheck the allowance used for IBR, PAYE, or ICR and the $50-per-dependent RAP adjustment.
- Assuming every loan qualifies: Verify loan type and borrower/disbursement history before relying on a plan comparison.
- Confusing an estimate with the bill: Wait for the servicer’s processed determination; that amount controls your account.
- Entering an outdated tax year: Use the tax information requested in the application and keep a copy of the document submitted.
A records checklist before you apply
- Latest Form 1040 with AGI on line 11.
- W-2 showing box 1 wages and confirmation of traditional versus Roth 401(k) treatment.
- HSA contribution records and evidence of whether contributions were made through payroll or separately.
- Health FSA salary-reduction records.
- Current family size and the number of dependents for the selected plan.
- Federal loan types, balances, and disbursement history.
- Calculator screenshots or a written worksheet showing assumptions and formulas.
Keeping these records makes it easier to identify whether a difference comes from AGI, contribution classification, family information, plan eligibility, or the servicer’s final processing.
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