Discretionary Income Calculator
Your discretionary income determines your IBR student loan payment. Enter your AGI and family size to find it instantly using the 2026 federal poverty guidelines.
The formula in one line: discretionary income = your AGI minus 150% of the federal poverty guideline for your family size. That is the entire calculation. IBR then charges 10% (or 15% on the old plan) of that number per year, divided into monthly payments.
Line 11 of your most recent Form 1040.
Count yourself, your spouse if filing jointly, and all dependents on your tax return.
What is discretionary income for student loans?
Discretionary income is the amount of your income above 150% of the federal poverty guideline for your family size. It is the number the government uses to calculate your IBR payment. It is not how much money you have left after bills. It is a specific formula: your AGI minus 150% of the poverty line for your family size.
For example, a single person earning $55,000 in 2026 has a poverty line of $15,650. 150% of that is $23,475. Discretionary income is $55,000 minus $23,475 which equals $31,525. New IBR charges 10% of that divided by 12 months, which is about $263 per month.
More worked examples
A single borrower earning $40,000 with no dependents has a poverty line of $15,650, so the 150% threshold is $23,475. Discretionary income is $40,000 minus $23,475, which is $16,525. New IBR charges 10% of that per year, about $138 a month.
A borrower with a family of three earning $65,000 has a poverty line of $26,650, so the 150% threshold is $39,975. Discretionary income is $65,000 minus $39,975, which is $25,025. New IBR runs about $209 a month, noticeably lower than the single-borrower example above despite higher income, because the larger family size raises the poverty exclusion.
A borrower earning $28,000 with no dependents has a poverty line of $15,650 and a 150% threshold of $23,475. Discretionary income is only $4,525, so the IBR payment is small, around $38 a month on new IBR.
Why discretionary income matters
IBR uses discretionary income to calculate your payment. RAP does not. RAP uses a percentage of your total AGI instead. This is why RAP and IBR give different payment amounts at the same income level. At lower incomes, the poverty guideline exclusion in IBR can make a big difference. At higher incomes, the difference shrinks because the poverty exclusion is a smaller share of total income.
2026 federal poverty guidelines
| Family size | Poverty line | 150% (IBR threshold) | 225% (old SAVE threshold) |
|---|---|---|---|
| 1 | $15,650 | $23,475 | $35,213 |
| 2 | $21,150 | $31,725 | $47,588 |
| 3 | $26,650 | $39,975 | $59,963 |
| 4 | $32,150 | $48,225 | $72,338 |
| 5 | $37,650 | $56,475 | $84,713 |
| 6 | $43,150 | $64,725 | $97,088 |
| Each additional | +$5,500 | +$8,250 | +$12,375 |
These are for the 48 continental US states and DC. Alaska and Hawaii have higher guidelines.
Discretionary income vs AGI: which plans use which
| Plan | Payment basis | Percentage |
|---|---|---|
| RAP | Total AGI | 1% to 10% |
| New IBR | Discretionary income (150% poverty) | 10% |
| Old IBR | Discretionary income (150% poverty) | 15% |
| SAVE (ended) | Discretionary income (225% poverty) | 5% to 10% |
Frequently asked questions
What is discretionary income for student loans?
It is your AGI minus 150% of the federal poverty guideline for your family size. IBR uses this number to calculate your monthly payment. It is not the same as disposable income or take-home pay.
Does RAP use discretionary income?
No. RAP uses a percentage of your total AGI, not discretionary income. This is one of the key differences between RAP and IBR. See the full RAP vs IBR comparison.
How do I find my AGI?
Your AGI is on line 11 of your Form 1040 tax return. If you have not filed yet, estimate it as your total income minus contributions to retirement accounts, student loan interest, and similar adjustments.
What if my income is below the poverty line?
If your AGI is below 150% of the poverty line for your family size, your discretionary income is $0 and your IBR payment is $0. You would still make a $0 qualifying payment each month for PSLF purposes.
How is discretionary income calculated exactly?
Take your AGI from line 11 of Form 1040, subtract 150% of the federal poverty guideline for your family size, and the result is your discretionary income. If your AGI is below that 150% threshold, discretionary income is $0.
Does a bigger family size lower my student loan payment?
Yes. The poverty guideline rises by about $5,500 per additional family member, so the 150% threshold rises by about $8,250 per person. A larger family size increases the exclusion, which lowers discretionary income and therefore lowers your IBR payment, even at the same total AGI.