Spouse and I both have loans that are under IBR and file jointly.  Trying to understand how the total payment is calculated and getting different answers.  I understand IBR is 15% of discretionary income.  So let’s say we have 50k discretionary income using our combined AGI minus 150% poverty line for our family size, our yearly IBR payment would be 7,500.  Here is where I am getting confused.

Is that 7,500 split evenly amongst what amount of loans we each have?  Meaning between the two of us, if we had equal loans, we would each pay 3750.

OR

Do we each wind up paying 15% so its 7,500 each?

Or is there a 3rd option I’m missing.

My understanding was that is worked out like option 1.  Lender seems to believe it’s option 2.  Thanks for your help.  Sorry if this is commonly asked I searched and didn’t catch anything similar.

Option 1, but modified.

If you are married filing jointly and both under IBR, the terms of your repayment are calculated pursuant to 34 C.F.R. § 685.221(b).

First, you determine the amount of your yearly payment by calculating 15% of your Adjusted Gross Income minus 150 percent of the poverty line for a family of 2 (assuming you have no kids).

Second, pursuant to 34 C.F.R. § 685.221(b)(ii) you take each borrower’s percentage of the couple’s total eligible loan debt (e.g. if you owe $60K and your spouse owes $40K, your percentage is 60% and your spouse’s percentage is 40%).

Third, you calculate the adjusted monthly payment for each borrower by multiplying your percentage times the amount of your yearly payment. So, you pay 60% of the annual number to your lenders and your spouse pays 40% of the annual number to his/her lenders.

The lender’s can’t require you each to pay 15% of your discretionary income, which would essentially mean 30% of discretionary income for your family!

-Biglaw Investor
http://www.biglawinvestor.com/

Here’s a link to the regulations I cited above:

https://www.law.cornell.edu/cfr/text/34/685.221