🧑🎓 Student Loans Should I stick to minimum IDR payments or pay loans aggressively
Student loan repayment plan
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Deciding between minimum payments on an Income-Driven Repayment (IDR) plan versus aggressive student loan repayment involves many factors. IDR plans, especially SAVE, can offer low payments and potential loan forgiveness after 20-25 years (or sooner for small balances on SAVE). A key feature of the SAVE plan is its interest subsidy: if your payment doesn't cover all accrued monthly interest, the government covers the rest, so your balance shouldn't grow from unpaid interest. However, the SAVE plan's full implementation has faced legal challenges, and its availability or terms could change. Critically, federal student loan forgiveness is not federally taxed through Dec 31, 2025, due to the American Rescue Plan Act. After 2025, forgiven amounts may become taxable income unless this exemption is extended. Some states may tax forgiven amounts regardless. This calculator explores these scenarios but always consult StudentAid.gov and a financial advisor.
Enter your current federal student loan and IDR plan information. This calculator assumes your IDR plan is similar to SAVE, where unpaid monthly interest above your payment is subsidized by the government, preventing balance growth from that unpaid interest.
If you chose to pay more than your IDR minimum.
Estimates for long-term planning and potential future tax implications.
Your current annual income (for context)
Calculations based on making minimum IDR payments until potential forgiveness. Assumes SAVE-like interest subsidy.
Total payments made over remaining IDR term
Estimated loan amount forgiven (simplified for SAVE)
Potential tax on forgiven amount (if taxed post-2025)
Total Cost (IDR Scenario - No Forgiveness Tax)
Total Cost (IDR Scenario - With Potential Post-2025 Forgiveness Tax)
Years to pay off loan with aggressive payments
9
Total amount paid under aggressive plan
Total interest paid under aggressive plan
If you pay IDR minimums, the difference between that and an aggressive payment could be invested.
Future value of investing the payment difference
- Tax Uncertainty is Key: The federal tax exemption for forgiven student loan debt expires after Dec 31, 2025. If not extended, the 'tax bomb' could make IDR forgiveness much more expensive. Some states might tax it anyway.
- SAVE Plan Assumptions: This calculator assumes benefits like the SAVE plan's interest subsidy. Current legal challenges to SAVE could impact its terms or availability.
- Cash Flow: IDR minimums provide better monthly cash flow, which can be used for other financial goals or investments.
- Time to Debt Freedom: Aggressive payoff typically means being debt-free much sooner, which has psychological benefits.
- Income Changes: Your income changes will affect your actual IDR payments over time (not dynamically modeled here). Recertify annually.
- Investment Risk: Investing surplus cash flow carries market risk. The return is not guaranteed.
- Official Estimates: Always use the Loan Simulator on StudentAid.gov for the most personalized and up-to-date federal student loan projections.
⚖️ Results Summary & Comparison
Comparing the financial outcomes. Remember the significant uncertainty around post-2025 taxation of forgiven student loans.
IDR - No Tax (Current Law Thru 2025)
IDR - With Potential Tax (Post-2025)
Aggressive Payoff Scenario
Opportunity Benefit of IDR Min Payments
Recommendation considers lowest potential long-term cost, but cash flow and risk tolerance are key. The tax uncertainty post-2025 is a major factor.
Financial Recommendation
IDR minimums (no tax).
Last updated by mayam
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Disclaimer: This content and any calculations provided are for informational purposes only. The views, calculations, and methodologies expressed are those of the author and do not necessarily reflect those of this platform. Not financial advice. Users are solely responsible for any decisions made based on this information.