Loan Repayment Methodology

Primary sources

Federal student loan repayment plan rules are codified at 34 CFR Part 685 (Direct Loan Program). The five income-driven repayment (IDR) plans — ICR, IBR, PAYE, New IBR, and SAVE — each have separate regulatory requirements within Part 685. We cite the specific CFR sections for each plan's payment formula.

The SAVE plan (Saving on a Valuable Education) was created by ED rulemaking in 2023, replacing REPAYE. Payment = 10% of discretionary income for graduate borrowers (5% for undergraduate-only). Discretionary income = AGI - 225% of federal poverty guideline for family size. HHS publishes poverty guidelines annually.

Monthly payment formulas

Standard 10-year: P × r(1+r)^n / ((1+r)^n - 1), where P = principal, r = monthly rate, n = 120. This is standard loan amortization per 34 CFR §685.208(a).

SAVE: payment = 0.10 × (AGI - 2.25 × poverty_guideline) / 12 for graduate loans; 0.05 for undergraduate. Undergrad/grad split borrowers use weighted average. IBR (new borrowers post-2014): 10% discretionary income. IBR (pre-2014): 15% discretionary income. ICR: lesser of 20% discretionary income or standard 12-year payment.

PSLF forgiveness

Public Service Loan Forgiveness (20 USC 1087e(m)) forgives remaining federal loan balance after 120 qualifying monthly payments while employed full-time by a qualifying employer (government or 501(c)(3)). We compute PSLF breakeven: the total paid under IDR for 10 years versus the total paid under standard repayment. If IDR total paid < standard 10-year total, PSLF is unambiguously favorable.

Limitations

SAVE plan litigation has created uncertainty — court orders have blocked certain SAVE provisions. Our calculator models SAVE as legislated pending final court resolution. Tax treatment of IDR forgiveness after 20-25 years is currently income-excluded through 2025 (ARPA) — post-2025 treatment is uncertain. Forgiveness under PSLF is permanently income-tax-free per statute.

Update protocol

This category is reviewed quarterly. Immediate updates are triggered by changes to the primary source documents listed in the citations above — rate table revisions, new agency guidance, or regulatory amendments.

Error reports go to info@bedrockatools.com. Corrections are published on our corrections page.