Most debt advice comes down to one rule: pay it off as fast as you can. For a car loan, a mortgage or a private student loan, that’s usually right. Every extra dollar toward principal is a dollar that stops collecting interest.
Federal student loans can be different. On this episode of the Tall Oaks Podcast, Branden DuCharme, CFP®, CMT, talks with David Hessel, CSLP®, CKA®, of Harvest Well Financial Partners about what to do once you already have student loans, and why forgiveness can turn the usual strategy upside down.
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Two kinds of student loans, two opposite strategies
Most borrowers end up with loans in two buckets: private and federal.
Private student loans work like any other debt. You can run an amortization schedule, compare interest rates and decide how aggressively to pay them down. The goal is simple: pay as much as you reasonably can to limit interest.
Federal loans offer something private loans don’t: income-driven repayment plans that end in forgiveness. You make payments based on your income for a set period, and whatever balance remains at the end is forgiven. If forgiveness is realistic for you, David explains, the strategy flips. Instead of paying as much as possible, you try to pay as little as the rules allow, because every dollar you don’t pay may be a dollar that’s eventually forgiven.
It’s a 180-degree difference from how you’d treat any other debt, and it’s why “just making the minimum payment” can be either a costly habit or a deliberate plan depending on your loans.
How income-based payments are calculated
Under Income-Based Repayment (IBR), your payment isn’t based on your balance. It’s based on your income:
Start with your adjusted gross income (AGI).
Subtract 150% of the federal poverty line for your family size.
Multiply by 10% or 15%, depending on when you first borrowed.
Divide by 12 for your monthly payment.
That’s why someone with $300,000 in loans could owe roughly $3,000 a month on a 10-year payoff, but a much smaller IBR payment, or even $0 in a year with little or no income. On IBR, a $0 payment still counts as a qualifying payment toward forgiveness. You recertify your income each year to keep the plan in good standing.
IBR forgives the remaining balance after 20 years for borrowers who first took out loans on or after July 1, 2014, and after 25 years for earlier borrowers.
The levers that lower your payment
Because the payment runs off AGI, anything that lowers AGI can lower the payment too. David points to two common levers:
Traditional vs. Roth retirement contributions. Pre-tax contributions lower your taxable income now and your student loan payment at the same time, a double benefit that can tip younger borrowers toward traditional accounts.
Married filing separately. If one spouse holds the loans and earns little or nothing (a stay-at-home parent, for example), filing separately can keep the higher earner’s income out of the payment calculation. The trade-off is that filing separately can push the household into higher tax brackets, so it takes real math to know whether it’s worth it.
Community property rules add another wrinkle. In the nine community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin), income is generally split 50/50 between spouses on separate returns, which can cut a high earner’s countable income in half.
Planning for the tax bill
Forgiveness through an income-driven plan is generally treated as taxable income in the year it happens. A temporary federal exemption ended on December 31, 2025, so non-PSLF forgiveness is taxable again starting in 2026.
David’s approach is to plan for it rather than fear it: invest in a taxable brokerage account over the repayment years so the money is there when the bill comes. Even in a 30% bracket, you’d pay roughly 30 cents in tax on each forgiven dollar and keep the other 70 cents of relief.
Is forgiveness worth pursuing? The 1.5x rule of thumb
Forgiveness only helps if there’s a balance left at the end. If you owe $20,000 or $30,000 and your income-based payment would clear it well before the 20- or 25-year mark, the juggling isn’t worth it.
David’s rule of thumb: if your federal loan balance is at least 1.5 times your annual income, it’s worth running a full analysis. A new physician assistant earning $100,000 with $150,000 in loans should look closely. A new attorney earning $200,000 with $100,000 in loans is usually better off treating the debt like any other loan.
Public Service Loan Forgiveness changes the math
The biggest exception to that rule is Public Service Loan Forgiveness (PSLF). If you work full time for a government agency or a qualifying nonprofit, including many nonprofit hospitals and public schools, PSLF can forgive your remaining federal balance after 120 qualifying payments, about 10 years. PSLF forgiveness is tax-free.
That makes interest growth almost irrelevant. Whether a $100,000 balance grows by $30,000 or $300,000 along the way, it’s all forgiven tax-free under PSLF. As David puts it, anyone with access to PSLF should probably get an analysis done, regardless of balance.
What changed in 2025 and 2026
Federal student loan rules shifted significantly under the One Big Beautiful Bill Act:
New repayment plan. The Repayment Assistance Plan (RAP) launched July 1, 2026. It bases payments on 1% to 10% of AGI with a $10 monthly minimum and forgives remaining balances after 30 years.
Fewer plans going forward. PAYE and ICR closed to new enrollees on July 1, 2026 and end on July 1, 2028. After that, IBR and RAP are the income-driven options, and anyone taking out a new federal loan on or after July 1, 2026 can only use RAP.
Borrowing caps. New professional students (medicine, law and similar) can borrow up to $50,000 a year and $200,000 total in federal loans; other graduate programs are capped at $20,500 a year and $100,000 total. Grad PLUS loans ended for new borrowers.
PSLF holds steady. The 120-payment structure is unchanged, and RAP counts as a qualifying plan.
The takeaway
If your loans are private, treat them like any other debt. If they’re federal, the right answer depends on your balance, your income, your employer, your filing status and even your state. That’s a lot of variables, which is why a side-by-side analysis is worth the time.
David recommends the free VIN Foundation Student Loan Repayment Simulator as a starting point. To work with David’s team, visit Harvest Well Financial Partners. Or, if you’d like to see how your student loans fit into your broader financial plan, schedule a conversation with DuCharme Wealth Management.
Listen to the full episode on Apple Podcasts, Spotify or YouTube.
Plan rules change frequently. Confirm current details at studentaid.gov before making decisions.