Question 1

What is the difference between IBR, PAYE, and SAVE?

Accepted Answer

All three are income-driven repayment plans (IDR) that cap your payment at a percentage of discretionary income. IBR (new) and PAYE both use 10% of income above 150% of the poverty line, with 20-year forgiveness. SAVE (the newest plan) uses 5% for undergraduate loans and a more generous income threshold (225% of poverty), plus an interest subsidy that prevents unpaid interest from capitalizing.

Question 2

What is PSLF?

Accepted Answer

Public Service Loan Forgiveness cancels your remaining federal loan balance after 120 qualifying payments (10 years) while working full-time for a government or non-profit employer. Payments must be made under an income-driven plan. Unlike other forgiveness programs, PSLF forgiveness is currently not taxed as income.

Question 3

What is discretionary income?

Accepted Answer

Discretionary income for IBR and PAYE is your adjusted gross income minus 150% of the federal poverty guideline for your family size. For SAVE, the threshold is 225% of the poverty line. Only income above this threshold counts toward your payment calculation.

Question 4

Is forgiven student debt taxable?

Accepted Answer

Forgiveness under IDR plans (IBR, PAYE, SAVE) is currently taxable as ordinary income in the year of forgiveness under federal law, though the American Rescue Plan suspended this through 2025. PSLF forgiveness is permanently tax-free. State tax treatment varies. This calculator shows the forgiven amount but does not calculate the tax on forgiveness.

Question 5

What interest rate should I enter for federal loans?

Accepted Answer

Federal student loan interest rates are set by Congress each year. For 2024-25: undergraduate Direct Loans = 6.53%, graduate Direct Unsubsidized = 8.08%, Direct PLUS Loans = 9.08%. Enter the actual rate on your loan from your servicer, or use these benchmarks for estimates.

Question 6

Can I switch repayment plans?

Accepted Answer

Yes, you can generally switch plans on federal loans at any time. Switching from a standard plan to an IDR plan restarts the forgiveness clock in most cases (with the exception of PSLF which tracks qualifying payments regardless of plan switches, provided they were on a qualifying plan).

Question 7

What is the Standard repayment plan?

Accepted Answer

The Standard plan spreads your loan over exactly 10 years (120 fixed payments). It is the default plan and results in the highest monthly payment but the lowest total interest paid. If you can afford the payments, Standard is almost always the cheapest option unless you qualify for PSLF.

Student Loan Repayment Calculator

Common questions