Student Loan Payoff Calculator

A genuinely complicated moment for federal student loan rules

Federal student loan repayment is mid-overhaul in 2026. Legislation signed in 2025 restructured the repayment landscape, phasing out several older income-driven plans and introducing a new one, with different rules depending on whether your loans were disbursed before or after July 1, 2026. This calculator models the general mechanism shared by the more established income-driven plans — a payment based on a percentage of income above a protected threshold — rather than any single named plan, since which specific plan you actually qualify for depends on your loan history. Confirm your exact options at studentaid.gov or with your loan servicer before making a repayment decision.

How “discretionary income” is actually defined

Discretionary income isn’t your full salary — it’s your income above a protected amount tied to the federal poverty guidelines for your household size, adjusted annually by HHS. This calculator uses the official 2026 guidelines directly: a single person’s protected amount is $23,940 (150% of the $15,960 poverty line), with roughly $8,520 added for each additional household member. Only income above that threshold counts toward your IDR payment calculation.

Key terms

Income-driven repayment (IDR)

A repayment structure where your monthly payment is calculated as a percentage of your discretionary income, not a fixed amortization schedule tied to your balance and rate.

Discretionary income

Your income above a protected amount tied to the federal poverty guidelines for your household size. Only the income above that threshold counts toward your IDR payment calculation.

Negative amortization

When your payment doesn’t cover the interest accruing that month, so the balance grows instead of shrinking — a real possibility under IDR on a large balance with a modest income.

Forgiveness

Under most IDR plans, any balance remaining after a set number of years of qualifying payments (20 years for the structure this calculator models) is forgiven outright.

Example

On this calculator’s own defaults — a $38,000 balance at 6.53%, $48,000 income, one-person household — the standard 10-year plan runs $432.06 a month and costs $13,847.51 in total interest before the loan is fully paid off.

The IDR payment on the same numbers works out to just $200.50 a month — below the roughly $207 a month accruing in interest alone at the start. The balance never gets paid down; it grows for the full 20 years, and $41,092.59 is still outstanding at forgiveness, after paying $48,120 in payments that went almost entirely to interest that IDR still didn’t fully cover.

Why the standard plan and IDR can lead to wildly different totals

The standard 10-year plan is a straightforward amortization, like a mortgage — a fixed payment that guarantees payoff in exactly 10 years, with a predictable total interest cost. An income-driven payment is calculated independently of your balance or interest rate, based purely on your income. On a large balance with a modest income, the IDR payment can be lower than the interest accruing each month — meaning the balance actually grows for years before eventual forgiveness, rather than shrinking the way a standard payment does.

The forgiveness trade-off

Most income-driven plans forgive any remaining balance after a set number of years of qualifying payments — 20 years is common for the plans this calculator’s structure is based on. That forgiveness is valuable, but it isn’t free in every sense: forgiven student loan debt has, at various points, been treated as taxable income at the federal level, and state tax treatment varies independently. Whether forgiveness is currently taxable in your situation is exactly the kind of detail that changes with legislation, so verify current treatment before counting on it as a clean outcome.

Using this calculator

Enter your actual current income, not a projected future salary — if you expect meaningful income growth, your real IDR payments will rise over time as your discretionary income grows, which this calculator (holding income constant) doesn’t capture. Treat the IDR side of this comparison as a rough current-year estimate of the mechanism, not a locked-in 20-year forecast.

This article is for educational purposes only and isn't legal, financial, or tax advice. See our Disclaimer for details.

Frequently asked questions

Is it better to pay off student loans or invest?

It depends mainly on your loan's interest rate versus a realistic expected investment return. Federal student loan rates in the mid-single digits are a closer call than high-interest credit card debt — some borrowers prioritize investing (especially to capture an employer 401(k) match) while still making standard payments, rather than aggressively paying down a moderate-rate loan first.

What happens to student loans if I die?

Federal student loans are discharged upon the borrower's death and are not passed on to a family member's estate or a cosigner. Private student loans vary by lender — some offer a similar death discharge, others may pursue the estate or a cosigner, so check your specific private loan's terms if this applies to you.

Do extra payments go toward principal automatically?

For federal loans, yes by default under current servicer rules, as long as you're current on all your loans — extra payments apply to principal rather than getting held as an advance payment toward next month, unless you specifically request otherwise. Confirm this with your servicer, since the mechanics can vary.

Should I refinance federal loans to a private lender?

Refinancing can lower your rate, but it permanently converts federal loans into a private loan — giving up federal protections like income-driven repayment, forgiveness programs, and the death discharge described above. That trade-off is worth weighing carefully, not just the rate difference, especially given how much federal repayment rules have been changing recently.