Income driven repayment plans and filing status

How it works

The borrower applies through the servicer or the federal student aid site and recertifies income every year. Discretionary income is adjusted gross income minus a multiple of the federal poverty line for the household size, and the payment is this year's official idr payment percent of discretionary (not yet verified here; see the official source below) of that figure divided by twelve, with the exact percent and the poverty line multiple depending on the plan. Family size includes children and a spouse. For a married borrower, a joint return means both incomes count toward the payment, while a separate return means only the borrower's own income counts under most plans. Payments count toward forgiveness after this year's official idr forgiveness years (not yet verified here; see the official source below) years, and toward Public Service Loan Forgiveness for a qualifying employer. The federal student aid site lists the plans that are open to new borrowers, which has changed by law in recent years.

What it gives

A payment can be as low as $0 in a low income year and still count as a qualifying payment.

Payments count toward forgiveness, including Public Service Loan Forgiveness.

The payment follows the borrower's income down after a job loss or a return to school.

What it costs, or where the catch is

A low payment can leave the balance growing, and interest treatment differs by plan.

Filing separately to lower the payment costs the couple other tax benefits.

Missing the yearly recertification can jump the payment to the standard amount.

A worked example

Kofi earns $48,000 and has $60,000 in federal loans. With a household of one, suppose the poverty line multiple leaves $18,000 of discretionary income. At a 10 percent plan his payment is $150 a month, since $18,000 times 0.10 is $1,800 a year, divided by 12. His standard ten year payment would be about $640. After he marries Wren, who earns $90,000, a joint return raises the income counted and his payment, while a separate return keeps it at his own figure.

Where it goes wrong

The common miss is forgetting the yearly recertification, after which the servicer resets the payment to the standard amount and the borrower scrambles to catch up.

Who confirms it for you

For your own numbers, the loan servicer. This page explains how the rule works for people in general; it does not know your situation and does not tell you what to do.

The official source

Federal Student Aid: Income driven repayment plans. Every figure that changes by year comes from the site's rules table, which the watcher checks against the official page on a schedule; where a figure is not yet verified, this page says so instead of printing a number.