401k Contributions and IBR Plan Question

[midwestheel]

My wife and I are currently on an IBR plan with our student loans. I had a thought last night regarding how 401k contributions affected IBR calculations, and was wondering if 401k contributions theoretically would reduce the monthly payments that we make since they decrease AGI. Do any of you have experience with this specific situation, and does it indeed decrease the monthly payment, or do 401k contributions get backed out when IBR options are being calculated?

[tomorrowsomewherenew]

I don't have direct experience with it. However, my understanding of IBR is that it is based on AGI (line 38), so 401k contributions and contributions to Traditional IRAs will decrease the amount you pay.

[Psychstache]

Yes, 401k contributions reduce your AGI which in turn lowers your income for calculating lBR amount.

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[skeptic]

+1 Psychstache. I have seen this firsthand (not mine) and can confirm it; 401k contributions reduce the income used to calculate IBR payments.