College Cost & Loan Repayment Planner

Federal student loan borrowers have several repayment options, each with different monthly payment formulas, term lengths, and forgiveness rules. Choosing the right plan can save you tens of thousands of dollars over the life of your loans.

Here is how each plan works:

• Standard (10-Year Fixed) — Equal monthly payments over 120 months. You pay the most per month but the least total interest because the term is short. No forgiveness.
• IBR (Income-Based Repayment) — 15% of discretionary income (income above 150% of the federal poverty level). Term is 25 years, and any remaining balance is forgiven (but may be taxable income).
• PAYE (Pay As You Earn) — 10% of discretionary income, capped at the Standard payment amount. Forgiveness after 20 years. Only available to new borrowers after 2007 with disbursements after 2011.
• SAVE (Saving on a Valuable Education) — Replaced REPAYE in 2023. Uses 10% of discretionary income but with a higher income protection threshold (225% of poverty level instead of 150%). Crucially, unpaid interest is subsidized — your balance does not grow if your payment is less than the monthly interest. Forgiveness after 20 years for undergrad loans.
• PSLF (Public Service Loan Forgiveness) — Not a separate payment plan but a forgiveness program. You enroll in an IDR plan (like PAYE or SAVE) and make 120 qualifying payments while working full-time for a qualifying public service employer. The remaining balance is forgiven tax-free.

The right plan depends on your loan balance, income, career path, and whether you work in the public or private sector. This calculator models all five so you can compare side by side.

The SAVE plan replaced REPAYE as part of Department of Education reforms finalized in 2023. While the core structure is similar (10% of discretionary income, 20/25-year forgiveness), SAVE introduced several improvements that make it the most generous IDR plan available.

Key differences from REPAYE:

• Higher income protection — SAVE shields 225% of the federal poverty level from the payment calculation, compared to 150% under older IDR plans. For a single borrower, that means roughly an extra $11,000 of income is excluded from the payment formula.
• Full interest subsidy — If your calculated payment does not cover the monthly interest, the government covers the difference. Your balance never grows beyond the original principal. Under REPAYE, only 50% of unpaid interest was subsidized on unsubsidized loans.
• Spousal income exclusion — If you file taxes separately, your spouse’s income is excluded from the payment calculation. Under REPAYE, spousal income was always included regardless of filing status.
• Faster forgiveness for small balances — Borrowers with original principal of $12,000 or less receive forgiveness after just 10 years of payments.

The interest subsidy alone can save thousands. Without it, a borrower whose $300/month payment does not cover $400/month in interest would see their balance grow by $1,200 per year. Under SAVE, the balance stays flat while they chip away at principal.

The debt-to-income ratio (DTI) for student loans compares your total loan balance at graduation to your expected annual starting salary. It is one of the simplest benchmarks for gauging whether your education borrowing is manageable.

General guidelines:

• Below 0.5x — Comfortable. Your standard 10-year payment will likely be under 8% of your gross monthly income. You have flexibility to choose any repayment plan.
• 0.5x - 1.0x — Moderate. This is where most graduates land. A standard payment is possible but tight. Income-driven plans give breathing room.
• 1.0x - 1.5x — Caution. Standard payments will feel heavy, especially in a high cost-of-living area. IDR plans or PSLF become much more attractive.
• Above 1.5x — Danger zone. At this level, borrowers often cannot afford standard payments and may see negative amortization even on IDR plans. PSLF or SAVE with its interest subsidy may be the best path.

Keep in mind that DTI is a starting snapshot. As your salary grows, the ratio effectively shrinks. But early-career years are the hardest financially, so a high DTI at graduation can create significant stress.

Lenders also look at monthly DTI when you apply for a mortgage or car loan. Student loan payments count against you, so a lower starting DTI gives you more financial flexibility in your 20s and 30s.

Understanding when interest starts accruing is critical because it determines your actual loan balance at graduation — which may be substantially more than what you borrowed.

The two types of federal loans:

• Subsidized Direct Loans — The government pays the interest while you are enrolled at least half-time and during the 6-month grace period after graduation. Your balance stays flat.
• Unsubsidized Direct Loans — Interest begins accruing from the day the loan is disbursed. If you do not make payments during school, the interest capitalizes (gets added to your principal) at repayment, increasing your total balance.

How capitalization works:

Say you borrow $10,000 at 6.53% in your freshman year. By graduation (3 years later), roughly $1,959 in interest has accrued. If unpaid, that interest capitalizes, making your new principal $11,959. You now pay interest on a larger balance. After the 6-month grace period, even more interest has been added.

This calculator models this compounding effect by accumulating each year’s borrowing with accrued interest through graduation and the grace period, giving you the realistic loan balance you will actually face when repayment begins.

PSLF forgives your remaining federal student loan balance tax-free after you make 120 qualifying monthly payments (10 years) while working full-time for an eligible public service employer. The program can save tens or even hundreds of thousands of dollars for borrowers with large balances.

Who qualifies:

• Employer type — Federal, state, local, or tribal government organizations, 501(c)(3) nonprofits, and certain other nonprofits. Military service counts.
• Employment status — Full-time (30+ hours per week) or equivalent across multiple qualifying employers.
• Loan type — Only Direct Loans qualify. FFEL or Perkins loans must be consolidated into a Direct Consolidation Loan first.
• Repayment plan — You must be on an income-driven repayment plan (IBR, PAYE, SAVE, or ICR). Standard plan payments technically qualify but maximize your payment amount, defeating the purpose.

When PSLF makes financial sense:

PSLF is most valuable when your loan balance is high relative to your income (DTI above 1.0x). If you owe $120,000 on a $55,000 salary, your IDR payments over 10 years will total far less than the balance, and the forgiven amount is tax-free. Compare this to standard repayment, where you pay every dollar plus interest.

The trade-off is career flexibility. You must remain with qualifying employers for the full 10 years. If you leave for a private-sector job after 7 years, those payments still count toward PSLF if you later return to public service.

If you are not pursuing PSLF and simply want the most affordable monthly payment with eventual forgiveness, the choice typically comes down to your income level, loan balance, and when you borrowed.

Decision framework:

• SAVE is usually the best default — It has the highest income protection threshold (225% FPL), the best interest subsidy (100% of unpaid interest covered), and excludes spousal income if you file separately. For most borrowers, SAVE produces the lowest monthly payment.
• PAYE if your payment would exceed the Standard amount — PAYE caps your payment at the 10-year Standard amount. SAVE does not have this cap, so if your income is high enough, PAYE might result in a lower payment.
• IBR as a last resort — IBR uses 15% of discretionary income (vs. 10% for PAYE/SAVE) and has a 25-year forgiveness horizon. It is generally less favorable unless you are grandfathered into old IBR terms.

Key considerations:

• Forgiveness under IDR plans (not PSLF) is currently treated as taxable income. A $100,000 forgiven balance could create a $25,000+ tax bill in the year of forgiveness.
• If your income will grow significantly over 20 years, your IDR payments may eventually exceed what you would have paid on the Standard plan. Run the numbers for your specific trajectory.

This is one of the most debated questions in personal finance. The answer depends on your interest rate, expected investment returns, tax situation, and risk tolerance.

The math:

• If your loan rate exceeds expected returns — Paying off the loan is a guaranteed, risk-free return equal to your interest rate. At 6.53%, that is a better risk-adjusted return than many fixed-income investments.
• If expected returns exceed your loan rate — Investing may build more wealth long-term, especially in tax-advantaged accounts like a 401(k) with an employer match. The S&P 500 has historically returned about 10% annually.
• If you are on an IDR plan with forgiveness — Extra payments reduce the amount forgiven, not the term. Every extra dollar you pay is a dollar that would have been forgiven. In this case, investing is almost always better.

The psychology:

Numbers aside, some people sleep better debt-free. Others are comfortable leveraging low-rate debt while investing. Neither is wrong. The worst choice is doing neither — not paying extra on loans and not investing either.

A common compromise: invest enough to get the full employer 401(k) match (free money), then throw extra cash at the loans.

Tuition inflation has consistently outpaced general consumer price inflation (CPI) for decades. While CPI has averaged roughly 2-3% annually, college tuition and fees have historically grown at 3-5% per year, depending on the type of institution.

Recent trends:

• Public in-state universities — Published tuition rose about 2-3% annually in recent years, partly held down by state funding and political pressure.
• Private universities — Published tuition has increased about 3-4% annually, though actual net prices (after institutional aid) have risen more slowly.
• Room & board — Housing and food costs track closer to general inflation but vary widely by institution and region.

What rate to use:

For planning purposes, 3% is a reasonable default for most scenarios. If you are looking at a public university in a state with strong funding commitments, 2% may be appropriate. For private universities with a history of above-average increases, consider 4%. The calculator lets you adjust this rate to stress-test different scenarios.

Federal student loan interest rates are set annually by Congress based on the 10-year Treasury note yield from the May auction, plus a statutory margin. Rates are fixed for the life of each loan, but new loans issued each academic year get a new rate.

2024-2025 academic year rates:

• Direct Subsidized & Unsubsidized (undergraduate) — 6.53%
• Direct Unsubsidized (graduate) — 8.08%
• Direct PLUS (parent/graduate) — 9.08%

How rates affect total cost:

A 1% increase in interest rate on $100,000 of loans adds roughly $6,000-$7,000 in total interest over a 10-year Standard repayment plan. Over a 20-year IDR plan, the impact can be $15,000 or more. This is why understanding your rate matters for long-term planning.

Private student loans have variable or fixed rates set by the lender based on creditworthiness and market conditions. They typically range from 4% to 14% and do not qualify for federal IDR plans or PSLF forgiveness.