How Is Discretionary Income Calculated For Student Loans?

Discretionary income calculation for student loans is a crucial aspect of managing repayment, especially for income-driven repayment plans. At income-partners.net, we aim to illuminate how this calculation impacts your financial strategy and potential partnership opportunities. Understanding this process helps optimize your loan repayment and explore avenues for income enhancement through strategic collaborations.

1. What Is Discretionary Income and Why Does It Matter for Student Loans?

Yes, discretionary income is the difference between your adjusted gross income (AGI) and a poverty line amount, and it significantly affects your student loan repayment options. Discretionary income is a cornerstone of income-driven repayment (IDR) plans, which are designed to make student loan payments more affordable. It’s the income you have left after covering essential living expenses, and it plays a pivotal role in determining your monthly student loan payments under IDR plans.

Understanding the Basics

Discretionary income isn’t just about what’s left over; it’s a defined calculation used by the U.S. Department of Education to assess your ability to repay your student loans. The calculation typically involves subtracting a specific amount from your AGI, based on factors like family size and the poverty guidelines published annually by the Department of Health and Human Services (HHS).

Why It Matters

1. Affordability: IDR plans cap your monthly loan payments at a percentage of your discretionary income, making payments more manageable if you have a lower income relative to your debt.
2. Eligibility: Your discretionary income is a key factor in determining your eligibility for various IDR plans.
3. Loan Forgiveness: Many IDR plans offer loan forgiveness after a certain number of years (typically 20 or 25 years) of qualifying payments. The amount you pay during this period is directly tied to your discretionary income, potentially leading to a lower overall repayment amount.

Example

Let’s say your AGI is $50,000, and the poverty guideline for your family size is $20,000. Your discretionary income would be $30,000 ($50,000 – $20,000). Under an IDR plan that caps payments at 10% of discretionary income, your annual payment would be $3,000, or $250 per month.

Strategic Implications

Understanding your discretionary income is crucial for more than just managing student loans. It allows you to:

• Plan Finances: Accurately assess your disposable income for budgeting and financial planning.
• Explore Opportunities: Identify potential areas for income growth and strategic partnerships, like those available at income-partners.net, to increase your overall financial health.
• Optimize Repayment: Choose the most suitable IDR plan based on your income and family size, potentially saving thousands of dollars over the life of the loan.

2. What Components Are Included in Discretionary Income Calculation?

Yes, the main components include your adjusted gross income (AGI) and the poverty guideline for your family size. Let’s explore each element in detail.

Adjusted Gross Income (AGI)

Your AGI is your gross income minus certain deductions. It’s a critical figure on your tax return (IRS Form 1040) and serves as the starting point for calculating discretionary income. Common deductions that reduce your gross income to arrive at AGI include:

• Contributions to traditional IRA accounts
• Student loan interest payments
• Health savings account (HSA) contributions
• Self-employment tax
• Alimony payments (for agreements established before 2019)

Poverty Guidelines

The poverty guidelines are issued annually by the Department of Health and Human Services (HHS). These guidelines vary based on family size and are used to determine eligibility for various federal programs, including income-driven repayment plans. The specific poverty guideline used in the discretionary income calculation depends on the IDR plan.

Discretionary Income Calculation Formula

The general formula for calculating discretionary income is:

Discretionary Income = Adjusted Gross Income (AGI) - (Poverty Guideline * 1.5)

Example Scenario

Let’s consider a hypothetical scenario:

• AGI: $60,000
• Family Size: 2 (Individual and one dependent)
• Poverty Guideline for a Family of 2: $18,310 (2024 HHS Poverty Guidelines for the 48 Contiguous States and the District of Columbia)

Using the formula:

1. Multiply the poverty guideline by 150%: $18,310 * 1.5 = $27,465
2. Subtract this amount from the AGI: $60,000 – $27,465 = $32,535

In this case, the discretionary income is $32,535.

How AGI and Poverty Guidelines Interact

• AGI Impact: A lower AGI results in a lower discretionary income, which can lead to lower monthly student loan payments under IDR plans. Strategies to reduce AGI, such as maximizing retirement contributions, can indirectly lower your student loan payments.
• Poverty Guideline Impact: As family size increases, the poverty guideline also increases. This results in a higher subtraction from AGI, lowering discretionary income and potentially reducing monthly payments.

Strategic Considerations

• Tax Planning: Optimize your tax strategy to minimize your AGI, thereby reducing your discretionary income.
• Family Size Documentation: Ensure your family size is accurately reported to reflect the correct poverty guideline.
• IDR Plan Selection: Understand how different IDR plans use discretionary income to determine payment amounts and choose the plan that best aligns with your financial situation.

Leveraging Income-Partners.net

Understanding these components allows you to strategize effectively. Platforms like income-partners.net can help you identify opportunities to increase your income through strategic partnerships, offsetting the impact of student loan payments.

Alternative text: Couple strategizing partnership opportunities to maximize their income potential.

3. How Do Income-Driven Repayment (IDR) Plans Use Discretionary Income?

Income-driven repayment (IDR) plans use discretionary income to set affordable monthly student loan payments, typically capped at a percentage of your discretionary income. Let’s delve into how this mechanism works across various IDR plans.

Overview of IDR Plans

IDR plans are designed to assist borrowers with federal student loans by basing their monthly payments on income and family size rather than the total loan balance. The main IDR plans include:

• Revised Pay As You Earn (REPAYE): Generally caps payments at 10% of discretionary income.
• Pay As You Earn (PAYE): Caps payments at 10% of discretionary income but requires that the payment amount is never more than the 10-year standard repayment plan amount.
• Income-Based Repayment (IBR): For new borrowers, payments are capped at 10% of discretionary income, but for older loans, it can be 15%.
• Income-Contingent Repayment (ICR): Caps payments at 20% of discretionary income or what you would pay on a fixed 12-year repayment plan, whichever is lower.
• Saving on a Valuable Education (SAVE): Replaces REPAYE, capping payments at 5% to 10% of discretionary income, depending on the type of loan.

How Discretionary Income Influences Payments

The core function of discretionary income in IDR plans is to determine the maximum amount you will pay each month. This is generally calculated as a percentage of your discretionary income.

Example Calculation

Consider a borrower with the following details:

• Discretionary Income: $30,000
• IDR Plan: REPAYE (10% of discretionary income)

Annual Payment: 10% of $30,000 = $3,000

Monthly Payment: $3,000 / 12 = $250

Key Considerations Across Different IDR Plans

1. REPAYE:

   • Payment Cap: Generally 10% of discretionary income.
   • Loan Types: Available for all eligible federal student loan borrowers.
   • Spousal Income: Includes spousal income, even if filing separately.

2. PAYE:

   • Payment Cap: 10% of discretionary income, but never more than the standard 10-year repayment plan amount.
   • Eligibility: Must be a new borrower as of October 1, 2007, and have received a Direct Loan disbursement after October 1, 2011.
   • Spousal Income: Excludes spousal income if filing separately.

3. IBR:

   • Payment Cap: 10% of discretionary income for new borrowers (as of July 1, 2014) and 15% for older borrowers.
   • Eligibility: Based on financial hardship.
   • Spousal Income: Excludes spousal income if filing separately.

4. ICR:

   • Payment Cap: 20% of discretionary income or what you would pay on a fixed 12-year repayment plan, whichever is lower.
   • Loan Types: Primarily for borrowers with Parent PLUS loans.
   • Spousal Income: Includes spousal income, even if filing separately.

5. SAVE:

   • Payment Cap: 5% to 10% of discretionary income, depending on the loan type.
   • Benefits: Protects more income and forgives loan balances faster than other IDR plans.
   • Spousal Income: May include spousal income, depending on filing status.

Strategic Implications for Borrowers

• Plan Selection: Choose an IDR plan that aligns with your income, family size, and loan type. The SAVE plan, with its lower payment cap, may be advantageous for many borrowers.
• Income Management: Strategically manage your income to lower your AGI, thereby reducing your discretionary income and monthly payments.
• Recertification: Annually recertify your income and family size to ensure your payments are accurately calculated.

Leveraging Income-Partners.net

Understanding how IDR plans utilize discretionary income enables you to make informed decisions about loan repayment. Platforms like income-partners.net can provide resources and partnership opportunities to help increase your income, making loan repayment more manageable and improving your financial stability.

Alternative text: Individual evaluating various student loan repayment plans to find the most suitable option.

4. How Does Filing Taxes Separately vs. Jointly Affect Discretionary Income?

Filing taxes separately versus jointly can significantly impact your discretionary income, especially under income-driven repayment (IDR) plans. The effect varies depending on the specific IDR plan.

Filing Jointly

When you file taxes jointly with your spouse, your combined adjusted gross income (AGI) is used to calculate your discretionary income. This means that both incomes are considered when determining your monthly student loan payments under IDR plans.

Impact:

• Higher AGI: Combining incomes typically results in a higher AGI, which increases your discretionary income.
• Higher Payments: A higher discretionary income generally leads to higher monthly student loan payments.
• Potential Benefits: Filing jointly can offer tax benefits, such as access to certain tax credits and deductions that are not available when filing separately.

Filing Separately

Filing taxes separately means that you and your spouse each report your income, deductions, and credits individually. This can affect your discretionary income differently based on the IDR plan.

Impact:

• Lower AGI: Filing separately can result in a lower individual AGI, which reduces your discretionary income.
• Lower Payments: A lower discretionary income typically translates to lower monthly student loan payments under some IDR plans.
• Lost Benefits: Filing separately may disqualify you from certain tax credits and deductions, such as the student loan interest deduction and the child and dependent care credit.

Specific IDR Plan Considerations

1. REPAYE (Revised Pay As You Earn):

   • Filing Jointly: Spousal income is always included in the discretionary income calculation, regardless of filing status.
   • Filing Separately: Spousal income is still included, making this option less advantageous for lowering loan payments.

2. PAYE (Pay As You Earn):

   • Filing Jointly: Combined AGI is used.
   • Filing Separately: Only your income is used, potentially lowering your monthly payments.

3. IBR (Income-Based Repayment):

   • Filing Jointly: Combined AGI is used.
   • Filing Separately: Only your income is used, potentially lowering your monthly payments.

4. ICR (Income-Contingent Repayment):

   • Filing Jointly: Spousal income is always included in the discretionary income calculation, regardless of filing status.
   • Filing Separately: Spousal income is still included, making this option less advantageous for lowering loan payments.

5. SAVE (Saving on a Valuable Education):

   • Filing Jointly: Spousal income is generally included.
   • Filing Separately: May exclude spousal income, potentially lowering payments.

Example Scenario

Consider a couple with the following details:

• Borrower’s AGI: $40,000
• Spouse’s AGI: $50,000
• IDR Plan: PAYE
• Filing Jointly: Combined AGI = $90,000
• Filing Separately: Borrower’s AGI = $40,000

If filing jointly, the PAYE calculation would be based on $90,000, resulting in higher monthly payments. If filing separately, the calculation would be based on $40,000, potentially lowering payments.

Strategic Implications

• Evaluate Tax Benefits: Compare the tax benefits of filing jointly versus the potential savings on student loan payments when filing separately.
• Consider IDR Plan Rules: Understand how each IDR plan treats spousal income based on filing status to make an informed decision.
• Consult a Professional: Seek advice from a tax professional or financial advisor to determine the most advantageous filing status for your specific financial situation.

Leveraging Income-Partners.net

Platforms like income-partners.net can help you explore opportunities to increase your income, which can offset the potential loss of tax benefits from filing separately. Additionally, understanding these tax implications aids in better financial planning and optimization of your loan repayment strategy.

Couple discussing taxes and student loan options

Alternative text: Couple reviewing tax documents to optimize their student loan repayment strategy.

5. Can You Reduce Your Discretionary Income to Lower Student Loan Payments?

Yes, you can strategically reduce your discretionary income to lower your student loan payments. Here are some effective strategies:

1. Maximize Retirement Contributions

Contributing to retirement accounts such as 401(k)s and traditional IRAs can lower your adjusted gross income (AGI), which directly impacts your discretionary income.

• How it Works: Contributions to these accounts are typically tax-deferred, meaning they are deducted from your gross income, reducing your taxable income and AGI.
• Example: If your gross income is $60,000 and you contribute $5,000 to a traditional IRA, your AGI becomes $55,000.
• Strategic Benefit: This lowers your discretionary income, leading to lower monthly student loan payments under income-driven repayment (IDR) plans.

2. Contribute to a Health Savings Account (HSA)

If you have a high-deductible health plan, contributing to an HSA can also reduce your AGI.

• How it Works: HSA contributions are tax-deductible, further lowering your taxable income and AGI.
• Example: If you contribute $3,000 to an HSA, your AGI is reduced by that amount.
• Strategic Benefit: Lowering your AGI reduces your discretionary income, resulting in lower student loan payments.

3. Adjust Your W-4 Form

Adjusting your W-4 form can help you fine-tune your tax withholdings throughout the year.

• How it Works: By increasing your deductions or allowances on your W-4, you can reduce the amount of taxes withheld from each paycheck.
• Example: Claiming additional allowances can result in less tax being withheld, increasing your take-home pay and potentially allowing you to make larger contributions to retirement or health savings accounts.
• Strategic Benefit: While this doesn’t directly reduce your AGI, it provides more cash flow to invest in tax-reducing strategies.

4. Claim All Eligible Deductions

Ensure you claim all eligible deductions when filing your taxes to minimize your AGI.

• How it Works: Deductions such as student loan interest payments, alimony payments (for agreements established before 2019), and business expenses can all lower your AGI.
• Example: Claiming the student loan interest deduction can reduce your AGI by up to $2,500.
• Strategic Benefit: Lowering your AGI through deductions reduces your discretionary income, resulting in lower student loan payments.

5. Consider State and Local Tax (SALT) Deductions

If you itemize deductions, claiming state and local tax deductions can help reduce your taxable income.

• How it Works: While the SALT deduction is capped at $10,000 per household, it can still provide a significant reduction in your taxable income.
• Example: Claiming the full $10,000 SALT deduction can substantially lower your taxable income.
• Strategic Benefit: Reducing your taxable income can lower your AGI, leading to lower discretionary income and student loan payments.

6. Maximize Self-Employment Deductions

If you are self-employed, take advantage of all available business deductions to reduce your net income.

• How it Works: Deductions such as business expenses, home office deductions, and self-employment tax deductions can significantly lower your taxable income.
• Example: Claiming all eligible business expenses can substantially reduce your net self-employment income.
• Strategic Benefit: Lowering your net self-employment income reduces your AGI, resulting in lower discretionary income and student loan payments.

Leveraging Income-Partners.net

Platforms like income-partners.net can provide resources and partnership opportunities to help increase your overall income, which can offset the impact of these strategies on your take-home pay. By strategically managing your income and deductions, you can optimize your student loan repayment while building a stronger financial foundation.

Alternative text: Individual strategizing to reduce discretionary income for optimized student loan repayment.

6. What Are the Potential Drawbacks of Lowering Your Discretionary Income?

While lowering your discretionary income can reduce your monthly student loan payments, there are potential drawbacks to consider:

1. Reduced Tax Benefits

Many strategies to lower your discretionary income involve increasing tax deductions or contributing to tax-deferred accounts. While these strategies lower your AGI, they may also reduce your overall tax benefits.

• Impact: Lowering your AGI through increased deductions can result in a higher overall tax liability if you are not careful.
• Example: Contributing heavily to a traditional IRA lowers your current AGI but may result in higher taxes in retirement when you start making withdrawals.

2. Impact on Retirement Savings

Aggressively reducing your discretionary income by maximizing retirement contributions may limit your ability to save for other financial goals.

• Impact: Focusing solely on lowering your discretionary income can lead to underfunding other important savings goals, such as emergency funds or down payments on a home.
• Example: If you prioritize reducing your AGI by contributing heavily to retirement accounts, you may not have enough cash flow to build an emergency fund.

3. Complexity in Tax Planning

Strategies to reduce discretionary income often involve complex tax planning, which can be challenging to navigate without professional assistance.

• Impact: Incorrectly implementing tax strategies can lead to errors on your tax return, potentially resulting in penalties or audits.
• Example: Miscalculating self-employment tax deductions can lead to an underpayment of taxes, resulting in penalties.

4. Forgone Tax Credits

Filing taxes separately to lower your discretionary income may disqualify you from certain tax credits, such as the Earned Income Tax Credit (EITC) or child and dependent care credit.

• Impact: Missing out on these credits can offset the savings from lower student loan payments.
• Example: Filing separately may make you ineligible for the EITC, which could provide a significant tax refund.

5. Dependence on Income-Driven Repayment Plans

Relying heavily on IDR plans with reduced payments can prolong the repayment period, leading to higher overall interest paid on your loans.

• Impact: While your monthly payments are lower, you will be paying interest for a longer period, potentially increasing the total cost of your loan.
• Example: If you extend your repayment period to 25 years under an IDR plan, you may pay significantly more in interest than if you repaid your loan in 10 years under a standard repayment plan.

6. Potential Tax Bomb

Loan forgiveness under IDR plans may be subject to taxation. The forgiven amount is treated as taxable income in the year the loan is forgiven, potentially leading to a significant tax liability.

• Impact: Being unprepared for this “tax bomb” can create a financial burden when your loans are forgiven.
• Example: If $50,000 of your student loans are forgiven, you may owe taxes on that amount in the year of forgiveness, potentially pushing you into a higher tax bracket.

Strategic Implications

• Evaluate Long-Term Costs: Consider the long-term costs and benefits of lowering your discretionary income, including the potential for higher interest payments and a tax bomb.
• Seek Professional Advice: Consult with a financial advisor or tax professional to develop a comprehensive financial plan that considers your individual circumstances.
• Balance Savings Goals: Strive for a balance between lowering your discretionary income and achieving other financial goals, such as retirement savings and emergency funds.

Leveraging Income-Partners.net

Platforms like income-partners.net can help you explore opportunities to increase your overall income, which can offset the potential drawbacks of these strategies. By strategically managing your income and expenses, you can optimize your student loan repayment while building a stronger financial foundation.

Alternative text: Individual weighing the advantages and disadvantages of reducing discretionary income for student loan repayment.

7. How Often Is Discretionary Income Recalculated for IDR Plans?

Discretionary income is typically recalculated annually for income-driven repayment (IDR) plans. This annual recalculation ensures that your monthly payments accurately reflect your current income and family size.

Annual Recertification

• Requirement: Borrowers enrolled in IDR plans must recertify their income and family size each year.
• Process: This involves providing updated income documentation, such as your most recent tax return or pay stubs, to your loan servicer.
• Timeline: The loan servicer will notify you in advance of your recertification deadline, typically several months before your current payment plan expires.

Impact of Annual Recalculation

• Payment Adjustment: Your monthly payments will be adjusted based on your updated discretionary income. If your income has increased, your payments will likely increase, and vice versa.
• Eligibility: The annual recalculation also ensures that you continue to meet the eligibility requirements for your chosen IDR plan.

What Happens If You Don’t Recertify?

• Payment Increase: If you fail to recertify your income and family size by the deadline, your loan servicer may increase your monthly payments to the standard repayment plan amount or the amount you were paying before enrolling in the IDR plan.
• Loss of IDR Benefits: You may lose access to the benefits of the IDR plan, such as loan forgiveness after a certain number of years of qualifying payments.

Life Events That Trigger Recalculation

While discretionary income is primarily recalculated annually, certain life events may warrant an earlier recalculation.

• Significant Income Change: If you experience a significant change in income, such as a job loss or a substantial pay cut, you can request a recalculation of your discretionary income.
• Change in Family Size: If your family size changes due to marriage, divorce, or the birth or adoption of a child, you can also request a recalculation.

How to Request an Earlier Recalculation

• Contact Your Loan Servicer: Contact your loan servicer to request an earlier recalculation of your discretionary income.
• Provide Documentation: You will need to provide documentation of the life event, such as a layoff notice, divorce decree, or birth certificate.
• Submit Updated Information: Submit your updated income and family size information to your loan servicer.

Strategic Implications

• Stay Organized: Keep track of your recertification deadline and gather the necessary documentation in advance.
• Report Changes Promptly: If you experience a significant change in income or family size, report it to your loan servicer as soon as possible.
• Review Your Options: Regularly review your IDR plan options to ensure that you are enrolled in the most advantageous plan for your current financial situation.

Leveraging Income-Partners.net

Platforms like income-partners.net can provide resources and partnership opportunities to help increase your overall income, which can offset the impact of these strategies on your take-home pay. By strategically managing your income and expenses, you can optimize your student loan repayment while building a stronger financial foundation.

Alternative text: Calendar reminder to recertify discretionary income for income-driven repayment plan.

8. What Is the Impact of the New SAVE Plan on Discretionary Income Calculations?

The Saving on a Valuable Education (SAVE) plan, which replaces the Revised Pay As You Earn (REPAYE) plan, has a significant impact on discretionary income calculations and offers more favorable terms for many borrowers.

Key Changes in the SAVE Plan

1. Higher Income Protection:

   • Previous (REPAYE): Discretionary income was calculated as the difference between your adjusted gross income (AGI) and 150% of the poverty guideline.
   • New (SAVE): Protects a higher amount of income by increasing the protected income level to 225% of the poverty guideline.
   • Impact: This means that a larger portion of your income is shielded from the calculation, resulting in lower discretionary income and, consequently, lower monthly payments.

2. Reduced Payment Percentage:

   • Previous (REPAYE): Payments were generally capped at 10% of discretionary income.
   • New (SAVE): Payments are capped at 5% to 10% of discretionary income, depending on the type of loan (undergraduate or graduate).
   • Impact: Borrowers with undergraduate loans will see their payments cut in half, while those with graduate loans will continue to pay 10%.

3. Interest Benefit:

   • Previous (REPAYE): Unpaid interest would capitalize, increasing the loan balance.
   • New (SAVE): If your monthly payment doesn’t cover the full amount of accruing interest, the government will waive the remaining interest.
   • Impact: This prevents your loan balance from growing due to unpaid interest, even if your payments are very low.

4. Shorter Forgiveness Timeline:

   • New (SAVE): Borrowers with original loan balances of $12,000 or less will receive forgiveness after 10 years of payments.
   • Impact: This provides a faster path to loan forgiveness for borrowers with smaller loan balances.

Impact on Discretionary Income Calculation

The primary impact of the SAVE plan on discretionary income calculation is the increased income protection level.

Example Scenario

Consider a borrower with the following details:

• AGI: $50,000
• Family Size: 1
• Poverty Guideline for a Family of 1 (2024): $15,060

Under REPAYE:

1. Calculate 150% of the poverty guideline: $15,060 * 1.5 = $22,590
2. Subtract this amount from the AGI: $50,000 – $22,590 = $27,410
3. Discretionary Income: $27,410

Under SAVE:

1. Calculate 225% of the poverty guideline: $15,060 * 2.25 = $33,885
2. Subtract this amount from the AGI: $50,000 – $33,885 = $16,115
3. Discretionary Income: $16,115

Monthly Payment Comparison

Assuming the borrower has undergraduate loans and is paying 5% of discretionary income:

• REPAYE: ($27,410 * 0.10) / 12 = $228.42 per month
• SAVE: ($16,115 * 0.05) / 12 = $67.15 per month

Strategic Implications for Borrowers

• Switch to SAVE: If you are currently enrolled in REPAYE or another IDR plan, consider switching to the SAVE plan to take advantage of the more favorable terms.
• Lower Payments: The higher income protection level and reduced payment percentage can significantly lower your monthly payments.
• Interest Benefit: The interest benefit can prevent your loan balance from growing, even if your payments are very low.

Leveraging Income-Partners.net

Platforms like income-partners.net can provide resources and partnership opportunities to help increase your overall income, which can offset the impact of these strategies on your take-home pay. By strategically managing your income and expenses, you can optimize your student loan repayment while building a stronger financial foundation.

Alternative text: Comparing the benefits of REPAYE and SAVE plans for student loan repayment.

9. How Does Marriage Impact Discretionary Income and Student Loan Payments?

Marriage can significantly impact your discretionary income and, consequently, your student loan payments under income-driven repayment (IDR) plans. The specific impact depends on your chosen IDR plan and how you file your taxes.

Filing Taxes Jointly

When you file taxes jointly with your spouse, your combined adjusted gross income (AGI) is used to calculate your discretionary income.

• Impact:

  • Increased AGI: Combining incomes typically results in a higher AGI, which increases your discretionary income.
  • Higher Payments: A higher discretionary income generally leads to higher monthly student loan payments.
  • Example: If your AGI is $40,000 and your spouse’s AGI is $50,000, your combined AGI is $90,000, which will be used to calculate your discretionary income.

Filing Taxes Separately

Filing taxes separately means that you and your spouse each report your income, deductions, and credits individually.

• Impact:

  • Lower AGI: Filing separately can result in a lower individual AGI, which reduces your discretionary income.
  • Lower Payments: A lower discretionary income typically translates to lower monthly student loan payments under some IDR plans.
  • Lost Benefits: Filing separately may disqualify you from certain tax credits and deductions, such as the student loan interest deduction and the child and dependent care credit.

IDR Plan Considerations

1. REPAYE (Revised Pay As You Earn):

   • Filing Jointly: Spousal income is always included in the discretionary income calculation, regardless of filing status.
   • Filing Separately: Spousal income is still included, making this option less advantageous for lowering loan payments.

2. PAYE (Pay As You Earn):

   • Filing Jointly: Combined AGI is used.
   • Filing Separately: Only your income is used, potentially lowering your monthly payments.

3. IBR (Income-Based Repayment):

   • Filing Jointly: Combined AGI is used.
   • **