Income Driven Payment and PAYE/IBR Cap Calculator

Instructions

Enter your data into the peach boxes. The "start" balance is the loan balance + interest when you first entered (or will enter) your payment plan. If you have multiple loans, add the balances and also calculate a weighted average interest rate. You can use this calculator to help. You do not have to separate subsidized and unsubsidized loans, you can just lump them together. 

 

Explanation

In order to enter either the IBR or PAYE plans, you need to demonstrate a "Partial Financial Hardship" (PFH). This is based on your income, loan balance, and whether you are attempting to select IBR or PAYE. PAYE is ALWAYS a better plan than IBR (if you qualify for PAYE), but PAYE has additional qualification criteria beyond simply having a PFH. The calculator will show you the income over which you would no longer have a PFH and thus not qualify for the given plan. 

Once in either IBR or PAYE, your payments will be "capped" at the "10-year standard" plan payment amount if your income rises such that your payments would otherwise be above the cap. You do not have to actually be eligible for any "standard plan", and it does not matter whether any standard plan is PSLF eligible for your loan type. You will STAY in either IBR or PAYE.

Upon reaching the cap you may be notified that your payments are "no longer based on your income". This will freak you out, because you know that only "income-driven plans" are eligible for PSLF. But you REMAIN in your PSLF-eligible income-driven plan, regardless of your income. All that has changed is that the formula for calculating your payments changes AS IF you were now required to pay off the loan in 10 years, based on the original balance at the time you entered the plan. So now your payments are set to this "capped" amount. Your payments are still PSLF-eligible (because your plan hasn't changed, just the payment calculation). Don't let anyone tell you that you need to switch out of IBR or PAYE (and into REPAYE or some other plan) simply because you have reached the cap.

Remember that anytime you switch payment plans into either IBR or PAYE your interest will be capitalized, and a new cap determined. This is because you effectively have a new loan balance (interest was added to the original principal upon changing plans) and will also now have a new cap.

Questions? Feedback? Suggestions? Send us an email! And if you found this calculator and the explanations useful, please share this page and our site with your colleagues/students/residents/etc, in order to help us in our mission to promote financial literacy and education among physicians.