Student Loan Payoff vs. Forgiveness
The SAVE plan ended March 10, 2026. This tool models IBR, currently the primary available IDR plan.
Student loan forgiveness is federally taxable starting 2026 (IRS guidance, March 23, 2026). The tax bill is included in your net cost below.
PAYE and ICR plans are available only through July 1, 2027.
Your loan situation
Check studentaid.gov if you're not sure — it lists every federal loan you have.
Your numbers
We fill in what we can. You only enter what only you know.
Model assumption if blank — enter your actual rate for accuracy (it's on your servicer dashboard)
Affects your federal poverty guideline threshold
Alaska and Hawaii use higher poverty guidelines
Enter 0 if you haven't started IDR yet
How we calculate this
This tool models three distinct scenarios for your federal student loans under current policy (June 2026).
IBR Forgiveness: We simulate your monthly payment under Income-Based Repayment each year, projecting your income forward at 3% annually. Payments are calculated as 10% of discretionary income for newer borrowers (first loan on/after July 1, 2014) or 15% for legacy borrowers — applied to your adjusted gross income minus 150% of the federal poverty guideline for your household size.
After your remaining forgiveness term (20 or 25 years, depending on your loan date), any remaining balance is forgiven. Per IRS guidance issued March 23, 2026, that forgiven amount is taxable as ordinary income in the year of forgiveness. We calculate the tax bomb as the incremental difference: federal tax on your projected income with the forgiven balance added, minus tax without it — which correctly captures forgiveness pushing you across brackets.
Extra Payments: We add your specified extra monthly payment on top of your IBR minimum and run the same month-by-month simulation. If the loan clears before the forgiveness date, you're done early. If it doesn't, we flag it — because in that case the extra payments bought you nothing except a bigger total paid before the same forgiveness date.
Lump Sum Today: Pay the full balance now. Zero interest, done immediately. We don't model the opportunity cost of that cash (it could otherwise be invested), and we say so in the assumptions panel.
Two guardrails built into the math: IBR payments are capped at the 10-year Standard repayment amount — for higher earners this cap means the loan pays off before forgiveness, and we tell you when that happens. And because tax brackets and poverty guidelines rise with inflation, we index both forward at 2.5% per year rather than comparing your future income against frozen 2026 thresholds, which would overstate both your payments and your tax bill.
Multiple loans: list each loan separately (with the official federal rate auto-filled from your disbursement year) and the tool models what actually differs. On the forgiveness track, your payment is set by income — not balances — so loan composition doesn't change what you pay, and we use the balance-weighted rate. On the payoff track we simulate loan by loan: required payments split the way servicers typically apply them, extra payments attacking your highest rate first, with the payoff order and the savings versus one-blended-loan math shown. Mark subsidized loans and we also model IBR's three-year benefit where the government pays their unpaid interest — it shrinks the forgiven balance and the tax bomb for negative-amortization borrowers.
Real scenarios
High balance, lower income: forgiveness usually wins
A nurse with $85,000 in grad school debt earning $62,000 on IBR pays roughly $420/month. Over 20 years of payments plus the tax bill on forgiven debt, her net cost is often $30,000–$50,000 less than paying the full balance. The math depends heavily on how fast her income grows.
Lower balance, higher income: payoff usually wins
An engineer with $28,000 in undergrad debt earning $95,000 has IBR payments nearly as high as standard repayment — the income-based calculation barely helps. Paying it off aggressively in 3–4 years saves tens of thousands in interest versus waiting for forgiveness.
The policy uncertainty wildcard
The SAVE plan — once projected to save millions of borrowers thousands of dollars — ended in March 2026 via federal court order after being available less than 2 years. Anyone who chose their repayment strategy based on SAVE had to recalculate. This is why the forgiveness scenario carries policy risk that the payoff scenario does not.