The Moment
You have federal student loans — Direct Loans, Stafford Loans, or consolidated federal loans. Unlike private loans, federal loans come with a safety net of repayment options that fundamentally change the optimal strategy. Using the wrong strategy can cost you tens of thousands of dollars.
The Strategy Tree
Branch 1: Are you PSLF-eligible? If you work for a government employer, 501(c)(3) nonprofit, or qualifying organization: - Enroll in the SAVE income-driven repayment plan (lowest payments) - Make 120 qualifying monthly payments (10 years) - Remaining balance is forgiven — tax-free - Do NOT pay extra. Every dollar above the minimum is money you are giving away that would have been forgiven. This is the #1 PSLF mistake. - Certify your employment annually at studentaid.gov
Branch 2: Not PSLF-eligible, rate under 5% - Enroll in SAVE plan for affordable monthly payments - Make minimum payments and invest the difference - The expected return from investing (7-10%) exceeds your loan rate (3-5%) - Let the 20-25 year forgiveness timeline work (remaining balance forgiven after 20-25 years of IDR payments, though the forgiven amount may be taxable)
Branch 3: Not PSLF-eligible, rate 5-7% - Gray zone. Make at least minimum payments on an IDR plan - Capture your 401(k) match first - Then decide: pay extra on loans (guaranteed 5-7% return) or invest (expected 7-10% with risk) - The tiebreaker is your risk tolerance and how much the debt stresses you
Branch 4: Not PSLF-eligible, rate above 7% - Pay aggressively. Direct every extra dollar to the loans - Consider refinancing to a lower rate (but only if you will NEVER need federal protections — refinancing to private is irreversible)
Run Your Numbers
Enter your student loan details.
Student Loan Payoff Planner
What to explore next
- →How do I check if I am PSLF-eligible?
- →Which income-driven repayment plan is best for me?
- →Should I refinance federal loans to get a lower rate?
Frequently Asked Questions
What is the SAVE plan?
SAVE (Saving on a Valuable Education) is the newest income-driven repayment plan. Payments are 5% of discretionary income for undergraduate loans (10% for graduate). Interest does not capitalize if payments do not cover it. It generally offers the lowest payments of any IDR plan and provides the best path to forgiveness for most borrowers.
Should I consolidate my federal loans?
Consolidation combines multiple federal loans into one with a weighted average interest rate. It does not save money on interest, but it simplifies payments and can make you eligible for IDR plans and PSLF if your current loans are not eligible. Do NOT consolidate federal loans into a private loan — you lose all federal protections permanently.