Student Loan Refinance vs Forgiveness Calculator

• Compares your current loan with a private refinance offer: monthly payment, total interest and total saved.
• Projects the federal plans available after July 1, 2026: the Repayment Assistance Plan (RAP), Income-Based Repayment (IBR) for older loans, and the Tiered Standard plan for new loans.
• Models Public Service Loan Forgiveness (120 qualifying payments, tax-free) and long-term forgiveness after 20, 25 or 30 years.
• Estimates the tax on forgiven balances, which became taxable again for discharges after December 31, 2025, and flags it as an estimate.

How to use this calculator

Choose whether your loans are federal Direct Loans or private loans, then enter the total balance, the interest rate (a weighted average if you have several loans), and how many years are left on your current schedule. Add the refinance offer's rate and term and your adjusted gross income (AGI) from your latest tax return.

Open Advanced to set your filing status and dependents, say whether any of your federal loans were first disbursed on or after July 1, 2026, choose your IBR version, turn on PSLF, and set the income growth and tax rates used for the forgiveness projection.

Refinancing federal loans is a one-way door

A private refinance pays off your federal loans with a new private loan. You cannot reverse it. Once the federal loans are gone, so is every federal protection that came with them:

• Income-driven repayment. RAP and IBR tie your payment to income, down to $10 a month or less.
• Forgiveness. Public Service Loan Forgiveness after 10 years of qualifying payments, and forgiveness of any balance left after 20 to 30 years on an income-driven plan.
• Deferment and forbearance under federal rules, for unemployment, economic hardship and other situations.
• RAP's interest waiver and principal match, described below.
• Federal discharge on death or total and permanent disability.

Private lenders set their own hardship terms, and they vary. A lower rate is only worth it if you have a stable income, an emergency fund, and are confident you will never need these protections. Anyone working toward PSLF should not refinance.

Which federal plans exist now

The One Big Beautiful Bill Act, signed on July 4, 2025, rebuilt federal student loan repayment. As of October 2026:

• Repayment Assistance Plan (RAP). Opened on July 1, 2026 for Direct Loans of any date, except Parent PLUS loans and consolidation loans that include one.
• Tiered Standard plan. The only fixed-payment plan for loans first disbursed on or after July 1, 2026. The term depends on the balance: 10 years under $25,000, 15 years from $25,000 to under $50,000, 20 years from $50,000 to under $100,000, and 25 years at $100,000 or more. Its payments do not count toward PSLF.
• Income-Based Repayment (IBR). Still open for loans disbursed before July 1, 2026. The law removed the old requirement to show a partial financial hardship.
• PAYE and ICR close no later than July 1, 2028. Borrowers in them must move to RAP, IBR or a standard plan. This calculator does not model them.
• SAVE was ended by a court order in March 2026. Servicers began notifying SAVE borrowers on July 1, 2026 and expect to reach all of them by the end of 2026. Each borrower has 90 days from the notice to pick a new plan, followed by a 30-day final notice. A borrower who does not choose is placed in the Standard plan, or the Tiered Standard plan if they have a loan disbursed on or after July 1, 2026.

Borrowers who take any new federal loan on or after July 1, 2026 can choose only between RAP and Tiered Standard for that loan. Set the disbursement field under Advanced to see that case.

How each option is calculated

Current loan and refinance. Standard fixed payments: payment = balance x i / (1 - (1 + i)^-n), where i is the monthly rate and n the number of months. Any refinance fees you enter are added to the new loan.

RAP yearly base   = one rate x your whole AGI
                    $10,000 or less: $120 a year
                    $10,001 to $20,000: 1%, $20,001 to $30,000: 2% ... $90,001 to $100,000: 9%
                    over $100,000: 10%
RAP monthly       = base / 12 - $50 per dependent, but at least $10
Interest waiver   = interest not covered by an on-time payment is waived
Principal match   = ED adds enough that principal falls by at least the lesser of $50 or your payment
Forgiveness       = balance left after 360 qualifying payments (30 years)

IBR monthly       = 10% (or 15% for pre-July 2014 borrowers) x (AGI - 150% of poverty guideline) / 12
                    never more than the 10-year standard payment; forgiveness after 20 (or 25) years

PSLF              = balance left after 120 qualifying payments on RAP or IBR, tax-free

RAP uses one percentage for your whole AGI rather than marginal tiers, so crossing a $10,000 line raises the payment noticeably. Its bands are not indexed for inflation. IBR uses the 2026 HHS poverty guideline: $15,960 for one person plus $5,680 for each additional person in the 48 contiguous states and DC, with higher figures for Alaska and Hawaii. The calculator raises income and the guideline each year by the rates you set and steps through every month.

Worked examples

Refinancing. With the defaults, a $45,000 federal balance at 6.5% with 10 years left costs $511 a month. A private refinance at 5% for 10 years costs $477 a month and saves about $4,041 in total. At 8% instead, refinancing would cost about $4,201 more. On a $55,000 AGI, RAP would start at $229 a month and IBR at $259; at that income both pay the loan off before any forgiveness, at a higher total cost than the standard schedule because the balance is repaid more slowly.

Forgiveness and the tax bomb. Take $90,000 at 6.8% and an AGI of $45,000, single, with income growing 3% a year. Refinancing at 5% saves about $9,736 and costs $114,551 in total. RAP starts at $150 a month. Over 30 years you would pay about $151,776, have about $45,244 of interest waived, and then have about $39,597 forgiven, which at a combined 27% tax rate is an estimated tax bill near $10,691. Under IBR the payment starts at $176; you would pay about $59,763 over 20 years and have about $152,637 forgiven, because unpaid interest keeps building. The estimated tax on that is about $41,212.

With PSLF. The same borrower working full time for a qualifying employer pays about $23,911 over 10 years on RAP, and about $84,000 is then forgiven tax-free. That is why refinancing is almost always the wrong move for someone on track for PSLF.

New loans. A borrower whose loans were first disbursed after July 1, 2026 with a $30,000 balance at 6.5% falls in the 15-year tier, with a fixed payment of about $261 a month.

Is student loan forgiveness taxable?

It depends on the type of forgiveness and the date. The American Rescue Plan Act excluded most federal student loan forgiveness from income for discharges from 2021 through December 31, 2025. That exclusion has expired. According to the IRS Taxpayer Advocate Service, forgiveness under an income-driven plan in 2026 or later is generally taxable as cancellation of debt income, and your servicer may send Form 1099-C.

Some forgiveness stays tax-free: Public Service Loan Forgiveness, Teacher Loan Forgiveness, and discharges for death or total and permanent disability. The One Big Beautiful Bill Act made the death and disability exclusion permanent for discharges after 2025. If you are insolvent when the debt is forgiven (your debts exceed the value of your assets), you may be able to exclude some or all of it on IRS Form 982. States set their own rules.

The calculator multiplies the forgiven balance by the federal and state rates you enter. That is a rough estimate: a large forgiven amount can push part of it into a higher bracket, and tax law could change again before your forgiveness date. You can switch the treatment to tax-free under Advanced to see the difference.

Assumptions and limitations

• Rules are as of October 22, 2026. Congress and the Department of Education can change them, and some RAP details are still being implemented. Check the Loan Simulator at StudentAid.gov or ask your servicer before you act.
• Every payment is full and on time. RAP's interest waiver and principal match depend on it. Deferment, forbearance and missed payments are not modelled.
• Married couples who both have federal loans. When filing jointly, RAP and IBR reduce each spouse's payment; the formula is not modelled here. The calculator also ignores the IBR interest subsidy on subsidized loans and any interest capitalization.
• Prior payments. How earlier payments count toward RAP's 360 is not fully settled, so the field for payments already made defaults to zero.
• Parent PLUS loans cannot use RAP and are not modelled.
• Totals are not discounted. A dollar paid in 25 years is counted the same as a dollar today, which makes long plans look more expensive than they are in today's money.
• Refinance offers depend on credit and income. The rate you are quoted may differ from an advertised rate, and variable rates can rise.

Common mistakes

Refinancing while pursuing PSLF. Private loans cannot be forgiven under PSLF, and qualifying payments already made are lost.

Comparing only the monthly payment. A longer refinance term can lower the payment and raise the total cost.

Ignoring the tax on forgiveness. Forgiveness after 20 to 30 years is now generally taxable. Saving toward that bill over the years spreads the cost out.

Missing the SAVE deadline. If you were on SAVE, pick a plan within 90 days of your servicer's notice or you will be placed in a standard plan with a higher payment.

Taking a new federal loan without checking the plan rules. A loan disbursed on or after July 1, 2026 limits that loan to RAP or Tiered Standard.

Frequently asked questions