The income-driven plan you use
Each of the four income-driven, or IDR, plans determines payments as a percentage of your disposable income in most cases:
|
Plan |
Payment Amount |
|---|---|
|
Saving on a Valuable Education (SAVE) |
10% of your discretionary income. This percentage will drop to 5% starting summer 2024. |
|
Pay As You Earn (PAYE) |
10% of your discretionary income. |
|
Income-Based Repayment (IBR) |
10% of discretionary income if you borrowed on or after July 1, 2014; 15% of discretionary income if you owed loans as of July 1, 2014. |
|
Income-Contingent Repayment (ICR) |
20% of discretionary income or fixed payments over a 12-year term — whichever is less. |
This discretionary income calculator makes it easy to estimate payment amounts. For a closer look, use the Loan Simulator provided by Federal Student Aid.
Other repayment plans may offer lower payments
That 10% cap isn’t necessarily the same for every plan. For instance, payments made under SAVE, which begin in summer 2020–24, will always consist of 5% of your income, regardless of your actual income. Conversely, PAYE sets a cap on payments, ensuring that they never exceed what you would pay under the standard repayment plan. This means that even if they make less than 2010% of your discretionary income, they will never be more than that.
Additionally, the federal government provides graduated and extended repayment plans that can reduce payments without taking into account your income. Although income-driven plans offer benefits like loan forgiveness that these plans do not, you should think about switching repayment plans if your estimated payment increases significantly.
Your family size and location
To determine your discretionary income, the Education Department finds the federal poverty guideline for your location and family size. Location won’t affect your payments unless you live in Alaska or Hawaii, but the larger your family, the less you’ll pay under an income-driven plan.
For illustration, let’s say you live in New York, are single, and have an adjusted gross income (AGI) of $40,000. Your first payment under PAYE at a four-year public university might be $151. If you tie the knot and have a family of two, your initial payment might be reduced to $87. If a family of three had a child, that payment might drop to $23.
Updating info early can reduce payments
Since you last recertified your income-driven plan, see if you’ve had any life changes — like having a baby. Other examples could be taking a lower-paying job or losing your job altogether. In these instances, you can submit updated information at studentloans.gov or to your servicer and ask for an immediate payment adjustment.
Your tax status with your spouse
Monthly payments under an income-driven plan for married individuals are contingent upon their status as tax filers.
Your payments almost always take your spouse’s income into account when filing jointly. Alternatively, if you file taxes separately but are married, the four income-driven plans base payments only on your income.
Your monthly payments may be significantly impacted by your spouse’s income. Let’s take an example where you owe $30,000, your spouse has an AGI of $100,000, and your AGI is $40,000.
- If you filed your taxes separately, you would be able to prove that you have the necessary partial financial hardship in order to be eligible for PAYE. Based on your income alone and a two-person household, your first payment might be $87.
- If you filed jointly, you would no longer be eligible for PAYE since your hardship would be eliminated by including your spouse’s $100,000 AGI. Instead, if you chose SAVE, your monthly first payment might be $797, which is more than nine times the $87 payment.
Examine tax filing options to pay less
Married borrowers may choose to file separately in order to lower their payments, but they shouldn’t base their tax filing status exclusively on their student loan debt. Consult a tax expert to find out whether filing jointly or separately makes sense for your particular situation.
Your spouse’s federal student debt
Your spouse’s federal student loans may also reduce your monthly payment if you file jointly. Private student loans never factor into income-driven calculations.
Let’s revisit our example where you have to pay $797. However, suppose your partner has $50,000 in federal student loan debt. The steps your servicer would take to calculate the amount of your payment are as follows.
- Calculate your combined federal student loan debt. Your $30,000 plus your spouse’s $50,000 is $80,000.
- Find the percentage of the debt you owe. $30,000 divided by $80,000 is 0. 375, meaning you owe 37. 5% of the debt.
- Multiply the joint payment amount by that percentage. Your new bill would be 37. 5% of $797, or roughly $299.
You and your spouse are free to decide on the repayment plan without consulting one another. Your spouse is not obligated to pay the remaining $498 if, for example, you chose to pay that $299. He or she could continue with the regular repayment schedule or choose an alternative.
If your finances are in order, you should think about refinancing your student loans. Some lenders let married borrowers refinance their debts together.
Refinancing federal student loans can be risky since you’ll forfeit benefits like income-driven repayment However, depending on the terms of your new loan, refinancing might lower your monthly payments and the total amount you repay if you feel comfortable doing so. Make sure you compare several refinance lenders to get the best possible deal.
FAQ
How are monthly payments calculated for student loans?
We begin by figuring out the monthly payment for each of your loans separately, accounting for the loan amount, interest rate, term, and prepayment. Next, we calculate the total amount you will pay each month by adding the monthly payments for all of the loans.
How much is the monthly payment on a $70,000 student loan?
What is the monthly payment on a $70,000 student loan? Depending on the APR and loan term, the monthly payment on a $70,000 student loan can vary from $742 to $6,285. For instance, if you borrow $70,000 as a student loan and repay it over the course of ten years at a five percent annual percentage rate (APR), your monthly payment will be $742.
What is the monthly payment on a 100 000 student loan?
|
Loan balance
|
Monthly payment
|
repaid
|
|
$100,000
|
$1,161
|
$139,330
|
|
$200,000
|
$2,322
|
$278,660
|
|
$300,000
|
$3,483
|
$417,990
|
|
$400,000
|
$4,644
|
$557,320
|
What is the monthly payment on 40000 student loan?
|
Amount Borrowed:
|
$40,000.00
|
|
Balance After Graduation:
|
$44,263.99
|
|
Balance After Grace Period:
|
$45,790.44
|
|
Total Interest:
|
$23,234.95
|
Read More :
https://www.nerdwallet.com/article/loans/student-loans/income-based-repayment-calculated
https://studentaid.gov/loan-simulator/