Student Loan Payoff Calculator

Federal Student Loan Interest Rates 2025–2026

| Loan Type | Rate | |-----------|------| | Undergrad Direct Subsidized/Unsubsidized | 6.53% | | Graduate Direct Unsubsidized | 8.08% | | Parent PLUS / Grad PLUS | 9.08% |

These rates are set annually in June based on the 10-year Treasury note yield. Private loan rates vary from 4%–16% depending on credit score and lender.

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Income-Driven Repayment (IDR) Plans

If you cannot afford the standard 10-year payment, IDR plans cap your payment based on discretionary income:

| Plan | Payment Cap | Forgiveness Timeline | |------|-------------|---------------------| | SAVE | 5% of discretionary (undergrad) | 10–20 years | | PAYE | 10% of discretionary | 20 years | | IBR (new borrowers) | 10% of discretionary | 20 years | | IBR (before July 2014) | 15% of discretionary | 25 years | | ICR | 20% of discretionary or fixed 12-yr | 25 years |

Discretionary income = AGI minus 225% of the federal poverty guideline. On a $40,000 income (single), this leaves roughly $12,000 in discretionary income — making your SAVE payment approximately $600/year ($50/month).

PSLF (Public Service Loan Forgiveness): After 120 qualifying payments (10 years) in a government or eligible nonprofit job, the remaining balance is forgiven tax-free. Qualifying employers include federal, state, and local governments, and 501(c)(3) nonprofits.

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The Real Cost of Minimum Payments

On a $35,000 loan at 6.5%, the standard 10-year monthly payment is approximately $397/month. Over 10 years you pay $12,600 in interest — 36% more than you borrowed.

Paying just $500/month instead reduces total interest to $8,100 and pays off the loan in 7.5 years — saving $4,500 and 2.5 years.

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Should You Refinance?

Refinancing replaces federal loans with a private loan at a lower rate. The tradeoff: you lose access to IDR plans, PSLF, federal forbearance programs, and death/disability discharge.

Only refinance federal loans if:

• You work in the private sector (PSLF is irrelevant)
• You have stable income and don't anticipate needing IDR
• You qualify for a rate meaningfully lower than your current federal rate

If you have Parent PLUS loans, refinancing into a private loan may be the only way to access lower rates — Parent PLUS loans are excluded from the most generous IDR plans.

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The Payoff vs. Invest Decision

| Loan Rate | Recommended approach | |-----------|---------------------| | Below 4% | Minimum payments; invest the rest | | 4%–6% | Split: some extra payments, some investing | | 6%–7% | Lean toward extra payments | | Above 7% | Aggressive payoff before investing in taxable accounts |

Federal loan interest is deductible (up to $2,500 from AGI) if your income is below $90,000 single / $185,000 MFJ — which partially offsets the effective cost for many borrowers.