Income Driven Repayment Calculator

June 6, 2019 No comments exist

By Joseph Reinke, CFA, Founder of FitBUX

Many websites have student loan income driven repayment calculators.  However, most are flawed and they make it hard to compare student loan repayment plans.Income driven repayment calculator video

At FitBUX, we saw these flaws and set out to fix them.  The result is our master income driven repayment calculator.  It includes all the calculations in one tool, it is customized to your situation, and it allows you to compare IDR plans to pay off strategies.

To recap, Income driven repayment, or IDR, is the term used by the government to describe five student loan repayment plans.  They are:

  • Revised Pay As You Earn (REPAYE)
  • Pay As You Earn (PAYE)
  • Income Based Repayment (IBR)
  • Income Based Repayment For Old Borrowers (Also IBR)
  • Income Contingent Repayment (ICR)

Before using our income driven repayment calculator, I highly recommend reading our IDR guide.  If you’d like to watch a video version of this article, click the video image above.

Income Driven Repayment Calculator Table Of Contents

Two Important Notes Before Starting

The Income Contingent Repayment plan is not listed on our tool or in the video. The reason why is we believe there is absolutely no reason for you to use it. Therefore, we have excluded it.

The other item to note, we do not discuss public service loan forgiveness (PSLF) in this article. The reason is PSLF is not a repayment plan. It is a feature of the income driven repayment plans. Therefore, we have an entire article that is 100% dedicated to our PSLF calculator.

How To Use Our Income Driven Repayment Calculator

Below is a step by step guide to using our IDR calculator. If you have questions be sure to sign-up for our free IDR webinar (The webinar schedule is coming out soon!).

Step 1: Building Your Profile

To use our income driven repayment calculator, sign-up for our free FitBUX Membership. To do so you can use this link: Become A FitBUX Member.  Creating your profile is essential to getting customized results that are tailored to your situation.

The profile should only take 3 – 5 minutes to create. The more details you include the more accurate our tools will be.

BUILD MY FREE PROFILE

Step 2: Enter Your Student Loan Details

This is extremely important because each loan you have has a different interest rate. Therefore, the interest charge varies for each loan. Thus, the results will be different in the income drive repayment calculator if put all you loan details into your profile relative to if you just use one large estimate of the loan balance and interest rate.

After you build your profile you will be taken to your FitBUX dashboard. Take the following steps to enter your loan details:

  • Click “Edit My Profile” on the left hand menu. Then select “Debt.”
  • Click “enter/edit details” next to “Federal Student Loans”
  • Enter your first loan. Then click “Add Another Loan”. Repeat until all your loans are included.
  • Click the “Save” button. Your loans are now stored in your FitBUX Profile.

Income Driven Repayment Calculator Loan Details

Step 3: Accessing The Income Driven Repayment Calculator

On the left hand side of your profile, click the link that says “My Tools.”  Then select the tool titled “Should I Pay Off Student Loans or Use IDR.” You will then enter our income drive repayment calculator.

As previously mentioned, this tool includes:

  • A REPAYE calculator
  • A PAYE calculator
  • An IBR calculator
  • A PSLF calculator
  • The true way to compare Income Driven Repayment plans vs Pay Off strategies (Discussed in our courses that are Coming Soon!!!)

Step 4: Entering Assumptions

Once you open the tool, you’ll be asked to complete a list of assumptions. These assumptions are extremely important to the income driven repayment calculator.

The reason they are so important is that they have a big impact on your monthly payment and how much interest you defer. Both of these inputs have a tremendous impact on your estimated tax liability.

Income Driven Repayment Calculator Assumptions

Your household size includes you, your spouse, and children.

For the question, “What is your annual gross income/AGI?” you can use one of two numbers:

  • Gross income: This is how much money you make before deductions. Using this number will result in a lower estimated tax liability relative to choice 2 below. You would want to use this figure in the calculator if you are trying to keep it simple and deciding if you’d like to pursue loan forgiveness or do a pay-off strategy instead.
  • Adjusted Gross Income (AGI): Using AGI will result in a more accurate estimation of the tax liability relative to option 1 above. The reason being is the government actually uses your AGI in the calculations for your monthly payment, not your gross income. AGI is also called “Discretionary Income”. To learn more I wrote an article titled Discretionary Income & Student Loans that you can check out.

For your expected long-term annual rate of increase in income, we default to 5%. We do this because the Federal government’s calculator defaults to that. However, 5% is a horrible assumption for most professions.

We recommend reducing the rate of increase assumption to 3%.  This will result in a higher expected tax estimation…i.e. it will give you a more conservative number.

Public service loan forgiveness is a feature of income driven repayment plans.  If you work full-time at a non-profit you can select Yes. You can read our public service loan forgiveness guide for more information. Also, we have a special article detailing our public service loan forgiveness calculator that you can check out.

After you input these assumption you click the “Next” button and proceed to the loan details screen. There you can either confirm your loans are correct (i.e. you’ve already entered them into your profile) or you can enter each individual loan if you haven’t already done so.

After you enter/confirm your loan details, scroll to the bottom of the income driven repayment calculator and click the Save and Continue button.

Step 5: Understanding The Results

The results screen displays customized figures on the 4 income driven repayment plans.  The figures are customized from the information on your FitBUX profile and the assumptions you entered into the calculator on step 4.

Income Driven Repayment Calculator ResultsThe first column represents your estimated monthly payment as of today.  The second column is what your estimated monthly payment would be in the last year of your plan (i.e. either year 20 or 25 depending on what income driven repayment plan you are on).  The second column is based on the income level and rate of increase assumption you entered in Step 4.

The third column, Total Paid, is all your monthly payments added up over the entire repayment period.  This is where the government’s calculator stops and this is why so many people make the mistake of going on income driven repayment plans to begin with.

The mistake is that they compare the cost displayed under the Total Paid column to the total cost of a pay off strategy (a standard 10 year or 25 year repayment plan). For most, the cost will be significantly lower for the income driven repayment plan if you stop here.

However, you have to 1) factor in the tax and 2) compare the proper time period. We discuss the tax below and the proper time period under Part B of the calculator results below.

To estimate your tax obligation, you first have to estimate what amount of student loans you will have forgiven. Our income driven repayment calculator provides that estimate for you under the Amount Forgiven column.

We then assume a 35% tax bracket.  You can change the tax estimate in our IDR Tax Savings Solution which I discuss in Step 6. The calculator shows your estimated tax under the Tax Obligation column.

The next column is how much you would pay in total. This column adds the Total Paid Without Tax column and the Tax Obligation column together.

Note: Many of asked us if our calculator takes into account the REPAYE interest subsidy.  Yes, it does!

Step 6: Implementing Your Plan & Saving For The Tax

Now that you know what your estimated tax liability will be, you need to develop a plan and implement it.  Therefore, you need to know the minimum amount you need to save each month.  We call this your “required minimum monthly savings amount.”  You also need a way to implement the plan because the estimated tax liability will change over-time.

We at FitBUX decided to make this easy for you and built a one-of-a-king Solution. It is called the IDR Tax Tracking Solution.

To sign-up from your profile, you click “My Solutions” from the menu on the left hand side of your screen when you are on the dashboard.  You can also sign-up for it by clicking this link.

Once you sign-up, you will link your student loan account and an account where you are saving the required minimum monthly savings amount to your FitBUX profile.  From there, the IDR Tax Savings Solution will provide you with a recommended minimum amount you should be saving and update your progress towards your tax liability in real-time.

Income Driven Repayment Calculator Am I On Track

If your estimated tax liability changes because 1 of the 3 events discussed in our Loan Forgiveness Guide happens, then your IDR Tax Savings Solution will update immediately.

We built the income driven repayment calculator and the IDR Tax Savings Solution so can develop your plan, have a an affordable way of implementing it (the IDR Tax Savings Solution is only $5 per month), and have peace of mind knowing your student loan plan is taken care of.

Want to read more about managing your money? Check out our blog.  

If you need help with your student loans, be sure to get help from one of our student loan experts.