That is a another great observation.

The difference between a $15 IDR payment and a $0 payment is huge when it comes to buying a house. Sadly, it is one of the many ways in which student debt can make buying a home difficult.

The issue with the $0 payments is that banks and lenders treat it as a deferment or a forbearance and not your actual payment (even though it is the actual payment). Because they don’t have a payment number, they just use .5% of the loan balance as the monthly payment. As awful as this policy is, it used to be worse. Until recently, they would use 1% of the loan balance as the monthly payment with they did their debt-to-income ratio calculations.

Thanks for your prompt reply!

A note on why what seems like a small difference in monthly payments that result when using the wrong years FPL to calculate discretionary income may be far more important than expected:

A retired friend of mine was applying for a mortgage a few years ago. His ICR monthly payment on his large Parent Plus loans was ZERO. Because it was zero the mortgage company divided the total loan balance by 10 and used that number as his “projected” annual payment obligation which disqualified him for the mortgage! He had to work part time for a while to get his income just a bit higher, and bring his monthly ICR payments to about $15 which the mortgage company then accepted as just a $15 monthly obligation, and he qualified for the mortgage. So it seems, that a very low payment is considered by the banks to be far LESS of an obligation than ZERO!

Hi Jesse,

I’m really impressed with your detective work on this one. I am indeed using the 2024 numbers, and the student aid simulators are still using 2022 numbers. I’m also not surprised to hear that others are still using 2023 numbers.

Ultimately, it is the servicer that is repsonsible for doing this calculation. If you apply today, you should get the benefit of the 2024 numbers, meaning the numbers should match what you are seeing here and on this site’s SAVE calculator. If your payment after applying appears to be based on the old numbers, I’d reach out to your servicer to get the error corrected.

You have identified one of the many ways the discretionary income calculation isn’t really fair. Whether you live in an expensive place like New York City or in an area with a very low cost of living, the Discretionary Income calculation doesn’t change. (The formula is a bit different for Alaska and Hawaii, but the other 48 states are treated the same.)

There are a few ways to shelter income from the calculation, but it requires a bit of careful tax planning.

Social security income can be tricky for income-driven repayment plan calculations. If you are living exclusively on social security income, it will usually mean $0 per month payments.

The Minimum required distributions may shift the calculations. In retirement, traditional 401(k) withdrawals are treated as income and would impact your AGI. If you are pulling out a few thousand dollars per year, the impact on monthly payments will be minimal. If you are pulling out 100k per year, it means larger payments.

Family size is defined slightly differently than what it is for tax purposes.

Here is a link to the income-driven repayment plan application: https://static.studentloans.gov/images/idrPreview.pdf

Family size is defined in section 9 as follows: Family size always includes you and your children (including unborn children who will be born during the year for which you certify your family size), if the children will receive more than half their support from you. For the PAYE, IBR, and ICR Plans, family size always includes your spouse. For the REPAYE plan, family size includes your spouse unless your spouse’s income is excluded from the calculation of your payment amount. For all plans, family size also includes other people only if they live with you now, receive more than half their support from you now, and will continue to receive this support for the year that you certify your family size. Support includes money, gifts, loans, housing, food, clothes, car, medical and dental care, and payment of college costs. Your family size may be different from the number of exemptions you claim for tax purposes.