Estimate student loan forgiveness under PSLF and income-driven repayment plans. See your monthly IDR payment, total paid before forgiveness, amount forgiven, and tax impact.
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Parents of a 5-year-old want to fully fund 4 years at Ohio State University (current cost ~$31,000/year in-state including room/board). They're opening a 529 plan today.
Takeaway: Ohio's 529 (CollegeAdvantage) provides a state tax deduction up to $4,000/yr per beneficiary — worth ~$190/yr at Ohio's 4.75% rate. If the child gets a scholarship, up to $10,000 can be rolled to a Roth IRA penalty-free under 2024 SECURE Act rules.
Using general 2-3% inflation to project future tuition underestimates costs. Published tuition at 4-year public universities has increased at roughly 4-5% annually for 20 years. Private schools run 3-4%. A $30,000/year school today costs ~$50,000/year in 13 years at 4% education inflation.
All 529 plans offer age-based portfolios that shift toward bonds as college approaches. Expense ratios vary from 0.05% (Utah's my529) to 0.9%+ in some state plans. You can use any state's 529 regardless of where your child attends college — your own state's plan is only worth it if it offers a state tax deduction.
Parent-owned 529 assets count as 5.64% toward Expected Family Contribution (EFC) in FAFSA. Student-owned assets count as 20%. High 529 balances reduce need-based aid dollar-for-dollar above your EFC threshold. For families close to aid cutoffs, this interaction matters significantly.
Tuition gets the attention, but room and board at a typical residential university adds $12,000-$18,000/year. Total cost of attendance including books and personal expenses runs $32,000-$80,000/year depending on institution type. Make sure your projection uses total COA, not tuition alone.
Based on your inputs
10 years (PSLF)
| Monthly IDR Payment (Year 1) | $88 |
|---|---|
| Monthly Standard Payment | $739 |
| Monthly Savings (IDR vs Standard) | $651 |
Forgiveness Summary
| Total Paid Before Forgiveness | $14,583 |
|---|---|
| Amount Forgiven | $65,000 |
| Tax on Forgiveness | N/A (tax-free) |
| Tax Status | Tax-free (PSLF) |
| Forgiveness Timeline | 10 years (PSLF) |
Comparison: IDR + Forgiveness vs. Standard Repayment
| Total Cost (IDR + tax) | $14,583 |
|---|---|
| Total Cost (Standard 10-yr) | $88,687 |
| Total Savings | $74,103 |
PSLF Eligible
Your employer qualifies for PSLF. After 120 qualifying payments (10 years), your remaining balance is forgiven tax-free. Submit the Employment Certification Form annually at studentaid.gov.
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PSLF is the most generous federal forgiveness program. After making 120 qualifying monthly payments (10 years) while working full-time for a qualifying employer, your remaining federal Direct Loan balance is completely forgiven — tax-free, with no cap on the forgiven amount. Qualifying employers include federal, state, local, and tribal government agencies, 501(c)(3) nonprofits, AmeriCorps, Peace Corps, and the military. The Department of Education has approved over 946,000 borrowers for PSLF as of 2024, forgiving more than $69 billion. The average forgiveness amount is approximately $73,000.
To qualify for PSLF, you may want to meet all four requirements simultaneously for each of your 120 qualifying payments: have eligible loans (Direct Loans only — FFEL and Perkins must be consolidated), work full-time for a qualifying employer (at least 30 hours/week), be enrolled in an income-driven repayment plan (SAVE, PAYE, IBR, or ICR), and make on-time monthly payments. Common mistakes include not consolidating older FFEL loans, not submitting the annual Employment Certification Form, being on the wrong repayment plan (Standard 10-year payments technically qualify but result in zero forgiveness since the loan is paid off at 10 years), and not tracking qualifying payments through the PSLF Help Tool at studentaid.gov.
Four IDR plans are available, each with different terms. The SAVE Plan (Saving on a Valuable Education): payments are 5% of discretionary income for undergrad loans, 10% for graduate, with discretionary income defined as income above 225% of the poverty level. Forgiveness after 20 years (undergrad) or 25 years (graduate). Unpaid interest does not capitalize. The SAVE plan is generally the strong option for most borrowers. PAYE (Pay As You Earn): 10% of discretionary income above 150% of poverty. Forgiveness after 20 years. Only available to new borrowers after October 2007. IBR (Income-Based Repayment): 10% (new borrowers) or 15% (older borrowers) of discretionary income above 150% of poverty. Forgiveness after 20 or 25 years. ICR (Income-Contingent Repayment): 20% of discretionary income or the payment on a 12-year fixed plan, whichever is less. Forgiveness after 25 years. Generally the least favorable option.
Forgiveness programs benefit borrowers whose debt is high relative to their income. As a rule of thumb: if your total student loan balance exceeds your annual income, an IDR plan with forgiveness will likely cost less than standard repayment. A teacher earning $50,000 with $80,000 in loans would pay roughly $165/month under SAVE, totaling about $39,600 over 20 years before the remaining balance (potentially $60,000+) is forgiven. Under standard repayment, that same borrower pays $920/month totaling $110,400. The forgiveness route saves over $70,000. PSLF is even better: the same teacher at a public school would pay only $19,800 over 10 years before forgiveness.
Under current law, PSLF forgiveness is permanently tax-free. IDR forgiveness is temporarily tax-free through at least 2025 under the American Rescue Plan Act. If that provision expires, forgiven amounts under IDR would be treated as taxable income. A borrower with $60,000 forgiven in the 22% tax bracket would owe approximately $13,200 in federal taxes. This"tax bomb" can be planned for by setting aside money in a savings account or investment account during the forgiveness timeline. Some financial planners recommend saving $50-100/month in anticipation. Even with the tax, IDR forgiveness is usually still cheaper than paying the full loan balance.
The SAVE plan, introduced in 2023, is the most borrower-friendly IDR plan ever offered. Key advantages: the lowest payment calculation (5% of discretionary income for undergrad), the most generous income protection (225% of poverty excluded), no interest capitalization when payments do not cover accruing interest, and automatic forgiveness of balances under $12,000 after just 10 years of payments. For a single borrower earning $40,000 with $25,000 in undergraduate loans, the SAVE monthly payment would be approximately $46 — compared to $283 on the standard plan. That borrower would pay about $5,520 over 10 years (if PSLF-eligible) or $11,040 over 20 years before forgiveness.
If pursuing PSLF: submit the Employment Certification Form annually to track qualifying payments. Consolidate any FFEL or Perkins loans into a Direct Consolidation Loan immediately. Enroll in the IDR plan with the lowest payment (usually SAVE). Make payments on time — set up auto-debit. If you switch employers, submit a new certification immediately. For IDR forgiveness: file taxes as"Married Filing Separately" if your spouse has income that would increase your IDR payment (this increases your tax liability but can reduce loan payments by more). Maximize pre-tax retirement contributions to reduce AGI and therefore IDR payments. Report changes in family size promptly, as each additional family member reduces your payment.
Some borrowers are better served by paying aggressively rather than pursuing forgiveness. If your income is high relative to your debt, IDR payments may be close to or exceed standard payments, meaning little or no forgiveness after 20-25 years. Run the numbers: if your total IDR payments plus potential tax on forgiveness exceed what you would pay under standard or accelerated repayment, aggressive payoff wins. High-income professionals (doctors, lawyers, engineers) with moderate debt often fall into this category. However, those same professionals with six-figure debt in lower-paying specialties (pediatrics, public interest law) often benefit enormously from forgiveness. Use this calculator to compare both scenarios with your specific numbers.
PSLF forgives remaining Direct Loan balances after 120 qualifying monthly payments (10 years) while working full-time for government or 501(c)(3) nonprofits. Forgiveness is tax-free. You may want to be on an income-driven repayment plan for payments to count.
Under IDR plans (SAVE, PAYE, IBR, ICR), remaining balances are forgiven after 20-25 years of qualifying payments. SAVE forgives after 20 years for undergrad, 25 for graduate loans. IDR forgiveness is currently tax-free through at least 2025 but may become taxable.
You need Direct Loans (consolidate FFEL loans), full-time qualifying employment (federal/state/local government, 501(c)(3) nonprofit, tribal org, AmeriCorps, Peace Corps), an income-driven repayment plan, and 120 qualifying monthly payments. Payments need not be consecutive.
PSLF forgiveness is always tax-free. IDR forgiveness is tax-free through at least 2025 under the American Rescue Plan Act. After 2025, forgiven amounts may be taxed as ordinary income unless Congress extends the provision.
PSLF is worthwhile if your monthly IDR payment times 120 months is less than your balance. Generally, PSLF benefits borrowers with high balances relative to their income. If your standard payment is close to your IDR payment, paying off faster may save more overall.
Make 120 qualifying monthly payments under an IDR plan while working full-time for a qualifying employer. After 10 years, the remaining balance is forgiven tax-free. Submit employment certification forms annually to track progress toward forgiveness.
Payments must be made on time, for the full amount due, under a qualifying repayment plan like IDR, on Direct Loans only, while employed full-time by a qualifying employer. Payments during COVID forbearance counted toward PSLF under special temporary rules.
No, private student loans are not eligible for PSLF, IDR forgiveness, or other federal forgiveness programs. Some employers offer student loan repayment assistance for both federal and private loans. Refinancing to a lower rate is the strong option for private loans.
After 20-25 years on IDR plans, forgiven balances are typically treated as taxable income. A $100,000 forgiven balance could create a $25,000-$35,000 tax bill. PSLF forgiveness is always tax-free. Plan for this potential liability by saving in advance.
Log into StudentAid.gov to view your payment count and loan details. Submit PSLF Employment Certification Forms through the PSLF Help Tool. Your loan servicer tracks qualifying payments and can provide a current count upon request.
IDR Payment = (AGI - Income Threshold) x IDR% / 12
SAVE: 5% above 225% of poverty (undergrad), 10% (grad)
PSLF: Forgiveness after 120 payments (10 years), tax-free
IDR: Forgiveness after 20-25 years
Every formula on this page traces to a federal agency, central bank, or peer-reviewed institution. We cite the rule-makers, not secondhand blogs.
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Calculations are for educational purposes only. Consult a qualified financial advisor for personalized advice.