Two things called discretionary income
In a household budget, discretionary income is what remains after the essentials — the money you can save, invest or spend on wants. In US student-loan rules it is a formula applied to your tax return that has nothing to do with your bills. This calculator gives the first; the section further down gives the second, because the two are routinely confused.
The formula
Essentials are housing, utilities, groceries, transport to work, insurance, minimum debt payments and childcare. Subscriptions, restaurants and holidays are not essential, whatever the budget says.
Worked example: $4,500 take-home, $3,200 essentials
- Discretionary income: $1,300 a month
- As a share of income: 28.9%
The 50/30/20 rule would put essentials at 50% of income and free money at 50%; here essentials take 71%. That gap is normal in high-rent cities and is the first thing to look at when saving feels impossible.
What the figure supports
| Use of the $1,300 | Split | Result |
|---|---|---|
| Save it all | 100% saving | $15,600 a year, an emergency fund in six months |
| 20% rule | $900 saved, $400 spent | $10,800 a year saved |
| Extra debt payment | $1,300 to a 22% card | Clears $5,000 in four months instead of years |
The student-loan definition
For federal income-driven repayment, discretionary income is adjusted gross income minus 150% of the poverty guideline for your household size. For 2026 the guideline for one person in the 48 states is $15,960, so 150% is $23,940. A single borrower with $50,000 AGI has $26,060 of discretionary income under IBR and pays 10% of it, about $217 a month.
The landscape changed in 2025–26. The SAVE plan, which used 225%, was vacated in March 2026. The Repayment Assistance Plan available since July 2026 does not use the formula at all — it takes 1% to 10% of full AGI. IBR keeps the 150% rule permanently; PAYE and ICR close in 2028. Anyone budgeting a loan payment on the old 225% figure is planning with a number that no longer exists.
Take-home, not gross
Use net pay. $4,500 net is roughly $5,800 gross for a US single filer, and the difference is exactly the money that never reaches you. Budgets built on gross income overstate discretionary income by the whole tax and payroll bill.
What this calculator leaves out
Irregular essentials — car repairs, medical bills, annual insurance — which are essential even though no single month contains them. Divide the annual total by twelve and include it, or the discretionary figure is too high.
Related calculators
- 50/30/20 calculator — the same income split three ways
- Budget calculator — the full breakdown of essentials
- Student loan calculator — the payment the loan definition feeds into