Discretionary income is what's left of your take-home pay after essential bills. For federal student loans, it's something else: your adjusted gross income minus a multiple of the federal poverty guideline.
One subtraction handles both meanings, once you pick the right two numbers.
What the calculator subtracts
It takes the second figure away from the first. It shows that answer as a share of the first figure. It also shows what you'd have left if the first figure were 10% higher.
Keep both boxes on the same period: monthly pay with monthly bills, or yearly totals for both. If essentials exceed income, the result turns negative, and savings, credit or unpaid bills fill the gap.
Which bills count as essential?
Essentials are the bills you'd still owe in a lean month. Think rent or mortgage, utilities, groceries, insurance, transport to work, childcare and minimum debt payments. Dining out, streaming and travel are discretionary, even when they feel routine.
Count yearly essentials too, like car insurance or registration, spread across 12 months. The budget calculator page sorts fixed, variable and irregular costs in more detail. For income, use take-home pay, the net figure on your pay stub. Pay after tax but before bills is disposable income, one step earlier.
Why small changes swing the result
Discretionary income is a thin slice of pay, so it moves faster than pay does. Take $4,000 of monthly take-home pay and $3,200 of essentials:
| Change to the budget | Take-home pay | Essentials | Discretionary income | Share of take-home pay |
|---|---|---|---|---|
| Starting budget | $4,000 | $3,200 | $800 | 20.0% |
| Take-home pay up 10% | $4,400 | $3,200 | $1,200 | 27.3% |
| Rent up $200 a month | $4,000 | $3,400 | $600 | 15.0% |
| Yearly bills of $1,800, spread monthly | $4,000 | $3,350 | $650 | 16.3% |
A 10% raise lifts discretionary income by half, from $800 to $1,200. A $200 rent increase cuts it by a quarter. Yearly bills of $1,800, set aside at $150 a month, take nearly a fifth.
For a benchmark, the 50/30/20 rule calculator puts needs at 50% of take-home pay. In the starting budget, essentials take 80%.
The student-loan version: AGI minus 150% of the poverty guideline
For federal income-driven repayment (IDR), the income figure is your adjusted gross income (AGI), not take-home pay. The federal IDR request form defines the term for Income-Based Repayment (IBR). It's the amount by which your AGI exceeds 150% of the poverty guideline. Pay As You Earn (PAYE) uses the same 150%. Income-Contingent Repayment (ICR) subtracts 100% of the guideline.
According to the IRS, AGI is your total income minus certain adjustments listed on Schedule 1. On the 2025 Form 1040, it's line 11a.
HHS published the 2026 poverty guidelines in the Federal Register on January 15, 2026. For one person in the 48 contiguous states and DC, the figure is $15,960. Each extra person adds $5,680. Alaska and Hawaii have their own, higher figures: $19,950 and $18,360 for one person.
The IDR form's family size always includes you, and your spouse if you're married. Children count if they get more than half their support from you. Here's what each household size leaves from $60,000 of AGI in the 48 states and DC:
| Household (IBR or PAYE unless noted) | Amount subtracted | Discretionary income on $60,000 AGI |
|---|---|---|
| 1 person (150% of $15,960) | $23,940 | $36,060 |
| 2 people (150% of $21,640) | $32,460 | $27,540 |
| 3 people (150% of $27,320) | $40,980 | $19,020 |
| 4 people (150% of $33,000) | $49,500 | $10,500 |
| 1 person, ICR (100% of $15,960) | $15,960 | $44,040 |
Each extra person lowers discretionary income by $8,520, which is 150% of $5,680. In the calculator, AGI goes in the first box and the amount subtracted in the second. A negative answer means your AGI sits below the line: no discretionary income under the plan's definition.
From discretionary income to a monthly payment
The IDR form says IBR payments are generally equal to 15% of discretionary income, divided by 12. It's 10% if you're a new borrower. New means you had no federal Direct or FFEL loan balance on July 1, 2014, or when you later borrowed.
For one person on $60,000, that's $3,606 a year at 10%, or $300.50 a month. At 15%, it's $450.75. PAYE also charges 10%. ICR charges the lesser of 20% of discretionary income or a 12-year fixed payment adjusted to your income.
IBR and PAYE payments are capped at the 10-year standard payment from when you entered the plan. To estimate it, run your balance and rate at entry through the student loan calculator over 10 years.
Under both plans, a spouse's income counts only if you file a joint federal tax return. Even then, it doesn't if you're separated or can't reasonably access it. You recertify income and family size every year.
RAP skips the subtraction
The Repayment Assistance Plan (RAP) has no poverty-guideline step. Federal Student Aid describes its payment as 1% to 10% of your AGI, divided by 12. It drops by $50 per dependent on your tax return. It can't go below $10 a month.
Edfinancial, a federal loan servicer, lists the bands. AGI over $10,000 up to $20,000 pays 1%, and each further $10,000 adds a point, up to 10%. At $60,000 of AGI, the rate is 5%: $3,000 a year, or $250 a month. That's below the $300.50 IBR payment for a single new borrower.
Applications opened on July 1, 2026. If all your loans were disbursed on or after that date, RAP is the only IDR plan open to you.
SAVE is gone, and PAYE and ICR are closing
Federal Student Aid's FAQ (August 2026) says a federal court order ended the SAVE plan. It's no longer available. PAYE and ICR are closing too. The IDR form says their borrowers must switch to, or be placed into, another plan before July 1, 2028.
Sources
- Federal Register (HHS), Annual Update of the HHS Poverty Guidelines (January 15, 2026)
- Federal Student Aid, Income-Driven Repayment (IDR) Plan Request form (OMB No. 1845-0102, expires December 31, 2028)
- Federal Student Aid, Top FAQs About Income-Driven Repayment Plans (August 2026)
- Edfinancial Services, Repayment Assistance Plan (RAP) (accessed September 27, 2026)
- IRS, Form 1040, U.S. Individual Income Tax Return (2025)