Discretionary Income Calculator

The discretionary income calculator estimates the income amount often used in student-loan income-driven repayment formulas. It starts with adjusted gross income, applies the selected marital-status rule, subtracts a protected percentage of the federal poverty guideline, and floors the result at zero. It also estimates a monthly payment by applying a chosen payment share to annual discretionary income.

This is not the same as the disposable income calculator. Disposable income subtracts taxes and adds transfers. This student-loan discretionary income estimate protects a poverty-guideline allowance before calculating payment capacity. For broader household planning, pair it with the budget calculator, debt-to-income calculator, and student loan payment calculator. For pay projections before student-loan calculations, compare the future salary calculator.

Inputs and interpretation

Choose marital status first. In the calculator’s compute logic, married filing jointly counts the borrower’s AGI plus spouse AGI. Single and married filing separately count the borrower’s AGI only. Enter state group as 48 states or DC, Alaska, or Hawaii because the poverty guideline differs by location. Enter annual Adjusted Gross Income from a tax return or careful estimate. Enter spouse’s Adjusted Gross Income only when the field is visible and relevant.

Enter family size as whole people. The calculator floors family size to a whole number and uses at least one person. Choose the plan poverty allowance: 100, 150, or 225 percent. These options are included to model common plan-style protections, not to guarantee current eligibility. Enter payment share as the percentage of annual discretionary income used for the simple monthly payment estimate.

Formula

The built-in 2026 poverty guideline table uses a base amount plus an additional amount for each family member above one. The calculator then applies the selected plan percentage:

$\text{protected income} = \text{poverty guideline} \times \frac{\text{poverty allowance}}{100}$

Counted AGI depends on marital status:

The annual discretionary income formula is:

$\text{discretionary income} = \max\left(0,\ \text{counted AGI} - \text{protected income}\right)$

The simple payment estimate is:

$\text{estimated monthly payment} = \frac{\text{discretionary income} \times \text{payment share}}{12}$

Worked example

Suppose the borrower is single, lives in the 48 states or DC group, has $80,000 of annual AGI, has a family size of 2, chooses a 150 percent poverty allowance, and uses a 10 percent payment share. The 2026 poverty guideline in the calculator for a family of 2 in the contiguous states is $21,640. The protected income is $21,640 multiplied by 150 percent, or $32,460.

Because the borrower is single, counted AGI is the borrower’s AGI only: $80,000. Discretionary income is counted AGI minus protected income, floored at zero. That is $80,000 minus $32,460, which equals $47,540 of annual discretionary income. The estimated annual payment at 10 percent is $4,754. Dividing by 12 gives an estimated monthly payment of $396.17.

If the same borrower selected a 225 percent poverty allowance, the protected income would be larger and discretionary income would be lower. If counted AGI were below the protected income amount, the calculator would show zero discretionary income and a zero estimated payment. That floor is important because the formula protects a baseline amount before applying the payment percentage.

Why this is not a household budget

Everyday discretionary money usually means cash left after taxes and necessities. Student-loan discretionary income is a formula concept. It may ignore rent, medical bills, childcare, transportation, credit-card payments, or local taxes. A borrower can have positive formula discretionary income even when a real budget feels tight. Conversely, a borrower with low AGI and a large protected allowance may have zero formula discretionary income even if some cash remains after expenses.

AGI is also not gross wages. It comes from tax rules and can be affected by adjustments. Using gross pay instead of AGI can overstate discretionary income. Using old AGI when income has changed can also mislead. Official income-driven repayment calculations may have documentation rules, alternative income evidence, spousal-income rules, interest subsidies, plan transitions, and annual recertification requirements that a simple calculator cannot capture.

The poverty guideline input deserves the same caution. This page’s form uses 2026 values in the compute function: base amounts for the first person and add-on amounts for each additional person, with separate tables for the contiguous states and DC, Alaska, and Hawaii. Government values can change by year, and student-loan rules can change by program. Always check current official guidance before relying on the estimate.

Tips for using the estimate

• Use AGI, not gross salary, unless you are only building a rough scenario.
• Select Alaska or Hawaii only if that is your applicable state group.
• Keep spouse AGI consistent with the filing-status scenario you are modeling.
• Compare 100, 150, and 225 percent allowances to understand plan sensitivity.
• Treat the monthly payment as a planning estimate, not a servicer quote.

Sources

• HHS ASPE, Poverty Guidelines — federal poverty guideline context for protected income calculations.
• CFPB, Your Money, Your Goals tools — budgeting context for distinguishing formula income from household cash flow.
• IRS, Publication 525 — income classification context for understanding taxable income inputs.