Discretionary Income Calculator
Enter your adjusted gross income, family size, and state to see your discretionary income under both the federal definition (used for income-driven student-loan repayment) and the personal-finance definition (income minus essential living expenses). Switch the repayment plan to compare estimated monthly payments under IBR, PAYE, and ICR using the official 2026 HHS poverty guidelines.
Formula
Worked example
A single borrower in California earning $55,000/year uses IBR. The 2026 FPL for a family of 1 is $15,960. IBR protects 150% of FPL = $23,940. Discretionary income = $55,000 - $23,940 = $31,060. Monthly payment = ($31,060 x 10%) / 12 = $258.83/month.
What is discretionary income?
Discretionary income is the money left over after you pay for necessities. The exact definition depends on who is asking. For federal student loan repayment, the U.S. Department of Education uses a specific formula: your annual adjusted gross income (AGI) minus a fixed percentage of the federal poverty guideline for your family size and state. For personal financial planning, discretionary income means your take-home pay (or AGI) minus your actual essential living costs: housing, food, transportation, healthcare, and utilities. Both definitions matter. The IDR definition tells you what your income-driven loan payment will be. The personal-finance definition tells you how much breathing room you actually have each month for savings, entertainment, and unexpected expenses.
How income-driven repayment plans define discretionary income
All legacy IDR plans anchor to the 2026 HHS federal poverty guideline, which is $15,960 per year for a family of one in the 48 contiguous states (Alaska and Hawaii use higher figures). Each plan then multiplies that guideline by a fixed percentage to create a protected amount - income below that threshold is completely shielded from loan payments. IBR and PAYE protect 150% of the poverty line, so a single borrower in a standard state has $23,940 of protected income in 2026. ICR protects only 100%, or $15,960. Once your income exceeds the protected amount, the plan charges a percentage of the excess: 10% for IBR (new borrowers) and PAYE, or 20% for ICR. That percentage is divided by 12 to arrive at your monthly payment. If your income is at or below the protected threshold, your payment is $0. The new Repayment Assistance Plan (RAP), launching July 2026, breaks from this formula and uses AGI directly, with a minimum payment of $10 per month.
2026 federal poverty guidelines by family size
The HHS updates poverty guidelines each January. For 2026, the base amount for a family of one is $15,960 in the contiguous 48 states, with $5,680 added for each additional family member. Alaska uses a base of $19,950 (plus $7,100 per extra person), and Hawaii uses $18,360 (plus $6,530). Family size includes you, your spouse if you file jointly, and all dependents on your tax return. For borrowers on IBR or PAYE, multiplying your family-size guideline by 1.5 gives the income level below which you owe nothing on your student loans. Understanding this figure is essential before choosing a repayment plan.
Using discretionary income for personal budgeting
Outside of the student-loan context, discretionary income is a planning tool. Financial advisors commonly use the 50/30/20 framework as a starting benchmark: allocate roughly 50% of after-tax income to needs, 30% to wants, and 20% to savings and debt repayment. If your essential costs consume more than 70-80% of your income, your discretionary share is very slim, which limits your ability to build an emergency fund, invest for retirement, or pay down debt faster than the minimum. Reducing one large fixed cost, such as housing, or consolidating high-interest debt often has a bigger impact on discretionary income than cutting variable spending categories. This calculator lets you enter your own essential cost categories so you can see exactly which expenses are eating into your flexibility.
IDR plan comparison: poverty threshold and payment rate
| Plan | Poverty threshold | Payment rate | Forgiveness term |
|---|---|---|---|
| IBR (new borrowers) | 150% of FPL | 10% of disc. income | 20 years |
| IBR (pre-July 2014) | 150% of FPL | 15% of disc. income | 25 years |
| PAYE (closed to new) | 150% of FPL | 10% of disc. income | 20 years |
| ICR | 100% of FPL | 20% of disc. income | 25 years |
| RAP (from July 2026) | N/A - uses AGI | Varies by income | 30 years |
IBR and PAYE protect 150% of the poverty guideline; ICR protects only 100%. PAYE is closed to new borrowers as of July 2024.
Frequently asked questions
What counts as discretionary income for student loans?
For federal income-driven repayment plans, discretionary income is your annual adjusted gross income (AGI) minus a plan-specific multiple of the federal poverty guideline for your family size and state. IBR and PAYE use 150% of the guideline; ICR uses 100%. Income at or below that threshold is fully protected and does not factor into your payment calculation. The actual monthly payment is then 10% or 20% of the excess amount, divided by 12.
What is the 2026 federal poverty guideline?
For 2026, the HHS poverty guideline is $15,960 for a family of one in the 48 contiguous states and DC. Each additional family member adds $5,680. Alaska uses a base of $19,950 (+$7,100 per person) and Hawaii uses $18,360 (+$6,530 per person). These figures are updated each January and are used to compute protected income thresholds for IDR plans, Medicaid eligibility, and other federal programs.
What is the difference between IBR and PAYE?
Both IBR (new-borrower version, post-July 2014) and PAYE protect 150% of the poverty guideline and charge 10% of discretionary income. The main practical difference is eligibility: PAYE was closed to new applicants in July 2024 after a court injunction. New borrowers must use IBR or ICR for legacy IDR plans, or the new RAP plan launching in July 2026. Older IBR borrowers who took out loans before July 2014 may still be on the 15% rate.
Does discretionary income include my spouse's income?
It depends on your filing status. If you file taxes jointly, your spouse's income is included in your AGI and therefore in the discretionary income calculation. If you file separately, only your own income is used - though filing separately may cost you more in taxes. For IBR, filing separately and excluding spousal income is allowed regardless of whether you repay jointly or on your own. Consult a student-loan advisor if your household situation is complex.
How can I increase my discretionary income?
You can increase discretionary income by raising your gross income (salary, side income) or reducing your essential expenses. For the student-loan definition, increasing your family size or using a plan with a higher poverty-line multiplier (IBR/PAYE vs ICR) also raises the protected threshold and may lower your payment. In personal-finance terms, refinancing high-interest debt, negotiating insurance rates, or moving to a lower-cost housing situation can meaningfully shift the balance.
What happens if my income is below the protected threshold?
If your AGI is at or below 150% of the poverty guideline (for IBR/PAYE) or 100% (for ICR), your calculated monthly payment is $0. You still need to certify your income annually, and the zero-payment months still count toward your forgiveness period. This is one of the key protections of income-driven repayment: borrowers with very low incomes are not required to make payments, and the loan balance continues accruing interest.
What is the Repayment Assistance Plan (RAP)?
RAP is a new federal student loan repayment plan launching July 2026. Unlike existing IDR plans, RAP uses your AGI directly rather than a poverty-adjusted discretionary income figure. Payments range from $10/month for very low earners up to a capped percentage of AGI for higher earners. The forgiveness timeline is 30 years. Since RAP does not use the poverty-guideline formula, the discretionary income calculations in this tool do not apply to it.