Income-Driven Repayment (IDR) Calculator with Forgiveness + Tax Bomb

The bargain IDR offers and the bill at the end

Income-Driven Repayment caps your monthly federal student-loan payment at 10% (PAYE / new IBR) or 15% (old IBR) of your discretionary income — defined as AGI minus 150% of the Federal Poverty Line. At low income with a large balance, that capped payment often doesn't even cover the monthly interest, so the balance grows for years. The bargain: after 20 or 25 years on the plan, the remaining balance is forgiven outright.

The bill: under current IRS rules that forgiveness is taxable as ordinary income in the forgiveness year. A $80,000 forgiveness can land a borrower in a 24% federal bracket, owing ~$19,000 to the IRS in a year they hadn't planned for. The "true net cost" line shows your total payments plus the bracket-honest tax bomb — the real comparison number against any payoff alternative.

How the math works

1. Discretionary income = AGI − 1.5 × Federal Poverty Line for your family size (HHS 2025: $15,650 for 1 person, +$5,500 per additional).
2. Required monthly payment = discretionary income × plan rate (10% PAYE/new IBR, 15% old IBR) ÷ 12. Floor of $0 if discretionary is negative.
3. Each month: interest accrues at rate ÷ 12, your payment is applied, balance evolves as balance + interest − payment. When payment < interest, the balance grows (negative amortization).
4. Forgiveness at year 20 (PAYE / new IBR) or 25 (old IBR) of the remaining balance.
5. Tax bomb = federal tax on (AGI + forgiveness amount) minus federal tax on AGI alone, using 2025 single-filer brackets — accurately captures the forgiveness pushing into higher brackets.

Sources: studentaid.gov for plan rules, HHS Poverty Guidelines 2025, IRS Pub 525 on cancellation-of-debt income, and the IRS 2025 brackets for the tax bomb.

What this simplifies: no interest subsidies are modeled (PAYE had a partial subsidy on subsidized loans for the first 3 years; SAVE had a full subsidy, but is in legal limbo). The tax bomb uses single-filer brackets — married couples filing jointly see a smaller bomb due to wider MFJ brackets. AGI grows at the chosen real rate; reality has lumpier raises.

Math runs locally. Inputs never leave your browser. Source on github.

Where this calculation doesn't apply

• You're going for PSLF. PSLF forgives the balance after 120 qualifying payments (10 years) instead of 20-25, and the forgiveness is TAX-FREE. If you work in government or a 501(c)(3), use the PSLF tool — it almost always beats IDR forgiveness for eligible workers.
• You have private loans. IDR exists only for federal Direct Loans. Private loans have whatever terms the lender set; usually a 5-20-year amortization with no forgiveness.
• Your income will grow fast. At higher income, the IDR payment can exceed the standard 10-year payment, and the plan caps it back to the standard amount. That breaks the "balance grows forever" assumption — you pay it off normally. The tool doesn't apply that cap; treat high-income results as upper bounds.
• You're married filing separately or filing jointly with a non-borrower. IDR income calculations get tricky with spouses. PAYE excludes the spouse's income if you file separately; IBR includes both if you file jointly. The model assumes single-filer AGI — if you're married, run it both ways.

What to actually do

1. Use your real AGI from your last 1040 (line 11). Don't use gross salary — it overstates the payment.
2. Pick the plan that matches your borrower type. Post-2014 first-time borrowers get PAYE or new IBR (10%, 20 yr); older borrowers may be stuck with old IBR (15%, 25 yr).
3. If you're saving for the tax bomb, set the amount aside in a separate fund starting now. $19,000 over 20 years is just $80/month.
4. If you're a public-service worker, switch to the PSLF tool — IDR forgiveness is the wrong target.
5. Recertify your income annually with your servicer. Your IDR payment recalculates with each update.