Student Loan: Standard vs Income-Driven Repayment Lifetime Cost
Example: Total federal student loan balance: 40000 $ · Weighted interest rate: 6.54 % · Annual gross income: 52000 $ · IDR payment as % of discretionary income: 10 % · Federal poverty guideline (2024, continental US): 14580 $ · IDR forgiveness term: 240 months
| Standard vs IDR total-paid difference | $-5,659 |
| Standard plan monthly payment | $455 |
| IDR monthly payment | $251 |
| Standard plan total interest | $14,601 |
| IDR total interest accrued | $43,957 |
| Balance forgiven at IDR term end | $23,697 |
Worked example
A $40,000 federal loan at 6.54% on the standard 10-year plan costs about $449/month and $13,800 in total interest. On a 20-year IDR plan at 10% of discretionary income with a $52,000 salary, the monthly payment drops to about $312, but total interest accrued over 20 years reaches roughly $34,500 — even with about $6,000 forgiven at the end. The standard plan saves more than $20,000 in this scenario. However, at a lower income or higher balance, the IDR forgiveness can flip the calculation.
Frequently asked questions
Is the forgiven amount on an IDR plan taxable?
Under current law through 2025, forgiven amounts are excluded from federal taxable income. After 2025, forgiven amounts are scheduled to revert to taxable income unless Congress extends the exclusion. For Public Service Loan Forgiveness (PSLF), forgiven amounts are permanently tax-free. Check current IRS guidance before making decisions based on forgiveness.
What counts as discretionary income for IDR?
Discretionary income is defined as the amount by which your adjusted gross income (AGI) exceeds 150% of the federal poverty guideline for your family size and state. For a single person in 2024, the poverty guideline is $14,580, so 150% is $21,870. Only income above that threshold counts as discretionary.
Are there multiple IDR plans, and do they differ?
Yes. SAVE (formerly REPAYE), PAYE, IBR, and ICR each calculate discretionary income slightly differently and have different forgiveness terms (10–25 years). SAVE uses 5–10% of discretionary income for undergrads. PAYE and IBR cap payments at 10% with a 20-year term for new borrowers. Use the Department of Education's Loan Simulator for your exact plan options.
Does my income stay static in this calculation?
This tool assumes a fixed income and payment for simplicity. In reality, IDR payments are recertified annually — if your income rises, your payment rises. The standard plan's payment stays fixed. For most borrowers, income grows over 20 years, which means IDR payments also rise and the forgiven balance may be smaller than a static model suggests.