Student Loan Forgiveness Calculator
Estimate your monthly income-driven payment and potential forgiveness amount under federal repayment plans like SAVE, PAYE, or PSLF based on your income, family size, and loan balance.
About this calculator
Income-driven repayment (IDR) plans cap your monthly student loan payment at a percentage of your discretionary income. Discretionary income is defined as your annual income minus a poverty-line exemption, which under many plans equals 100–225% of the federal poverty guideline. The formula used here approximates monthly discretionary income as: max(0, (annualIncome − (12,840 + 4,540 × max(0, familySize − 1))) / 12). The poverty line base ($12,840) and per-additional-person amount ($4,540) reflect federal guidelines; only income above this threshold is counted as discretionary. Your monthly payment is then a fixed percentage of that figure (e.g., 5–10% depending on the plan). After a qualifying payment period — 10 years under PSLF, 20–25 years under IDR — any remaining balance may be forgiven.
How to use
Suppose your annual income is $55,000, family size is 3, and you are on an IDR plan that charges 10% of discretionary income. Poverty exemption = 12,840 + 4,540 × (3−1) = 12,840 + 9,080 = $21,920. Annual discretionary income = 55,000 − 21,920 = $33,080. Monthly discretionary income = 33,080 / 12 ≈ $2,757. Monthly payment = 2,757 × 10% ≈ $276. If your standard 10-year payment on a $60,000 balance at 5.5% would be $651/month, an IDR plan saves you $375/month, and any balance remaining after the qualifying period could be forgiven.
Frequently asked questions
Who qualifies for Public Service Loan Forgiveness (PSLF) and how does it work?
PSLF forgives the remaining balance on your Direct federal student loans after you make 120 qualifying monthly payments while employed full-time by a government or eligible nonprofit organization. You must be enrolled in an income-driven repayment plan — not the standard 10-year plan — for your payments to count. After exactly 10 years (120 payments), the forgiven amount is not currently treated as taxable income under federal law. Eligibility is strict: only Direct Loans qualify, private loans do not, and payments must be made on-time under a qualifying plan while in qualifying employment.
How is discretionary income calculated for income-driven student loan repayment plans?
Discretionary income is the portion of your gross annual income that exceeds a multiple of the federal poverty guideline for your family size and state. Different IDR plans use different thresholds: the older IBR and PAYE plans exempt 150% of the poverty line, while the newer SAVE plan exempts 225%. Your monthly payment is then set at 5–10% of your discretionary income divided by 12. A larger family size raises the exemption threshold, lowering your discretionary income and therefore your monthly payment. This calculator uses the base poverty-line structure (100% exemption) as an approximation — check your specific plan for the exact multiplier.
What happens to the forgiven student loan balance after income-driven repayment — is it taxable?
Under traditional IDR forgiveness (after 20–25 years), the cancelled debt was historically treated as taxable income at the federal level, potentially resulting in a large tax bill in the year of forgiveness. However, under the American Rescue Plan Act, IDR forgiveness is federal-income-tax-free through 2025, and legislative proposals aim to make this permanent. PSLF forgiveness has always been tax-free at the federal level. State tax treatment varies — some states do tax forgiven amounts. It is important to plan ahead by setting aside savings or adjusting withholding in the years approaching forgiveness to avoid a surprise tax liability.