Unconventional Ways to Payoff Student Loans
Good to Know
Student loan debt is a financial albatross, voraciously consuming discretionary income and obstructing saving for home down payments, retirement, and more. Take this uber short quiz to see just how challenging the repayment of student loan debt can be.
This article seeks to make you aware of unconventional ways to pay off student loans, have them forgiven, or simultaneously save for retirement under existing law as follows:
- SAVE Plan,
- Employee Assistance Program,
- 401(k) match for student loan repayments,
- 529 College Savings Plan, and
- Service based forgiveness.
SAVE Plan
The Saving on Valuable Education (SAVE) Plan first became available in the summer of 2023. According to the U.S. Department of Education (DOE) the SAVE plan “is the newest income-driven repayment (IDR) plan. Like other IDR plans, the SAVE Plan calculates your monthly payment amount based on your income and family size. In addition, the SAVE Plan has unique benefits that will lower payments for many borrowers.”
According to the DOE, the SAVE plan:
- Bases borrower’s monthly payment on their income and family size,
- Lowers payments because payments are based on a smaller portion of the borrower’s adjusted gross income (AGI), and
- If the monthly payment is paid timely—but it is not enough to cover the accrued monthly interest—the government does not charge interest that month.
For example, a single (unmarried) student with no children would have a $0 required monthly payment if their adjusted gross income was $32,800 or less (2024, as indexed). If the minimum monthly payment required—even if the required payment is zero—is made for ten years, the student loan may be eligible for forgiveness. Borrowers can apply for the SAVE plan here.
Other resources include the following.
- An employer-sponsored Education Assistance Plan (EAP)—reimbursement of an employee’s educational expenses—including repayment of student loan debt—is income tax free up to $5,250.
- 401(k) Match for Student Loan Repayments—effective in 2024, an employer may provide 401(k) matches based on an employee’s student loan repayments.
- 529 College Savings Plan—up to $10,000 in tax-free student loan payments can be made from a beneficiary’s 529 College Savings Plan.
- Public Service Loan Forgiveness (PSLF)—military and other public service may qualify for student loan debt forgiveness.
The Bottom Line
Our focus in this article is on federal programs. Be sure to check for similar resources at the state, local, or university level as well.
Disclaimer
The information presented herein is provided purely for educational purposes and to raise awareness of these issues; it is not meant to provide and should not be used to provide financial advice of any kind—including but not limited to legal, identity theft protection, investment, income tax, risk management, retirement, or estate advice. Additional clarification of these topics from the DOE and IRS is expected in 2024. Consult an experienced, credentialed expert for detailed guidance.
