Federal loans carry PSLF (10y for public service), IDR forgiveness (20-25y), and emergency forbearance. Refinancing trades all of that for a lower rate.
Best path for your federal loan
Refinancing saves real money, but only consider it if PSLF is genuinely not on the table. Income-Driven Repayment and forbearance disappear with refi too. If your career path could pivot toward qualifying employment, keep the federal optionality.
PSLF cost shown assumes SAVE-style 5% of discretionary income for 10 years. Refi cost is amortising over the chosen term at the given rate. IDR forgiveness post-25y is taxable in normal years, the pandemic-era federal exemption may sunset.
Worth weighs PSLF vs refi against your career trajectory, household income and other debts. Join the waitlist.
Income-Driven Repayment plans (SAVE, PAYE, IBR) cap monthly payments at 5-15% of discretionary income. The remaining balance is forgiven after 20-25 years. The forgiven amount is taxable in normal years. For low-to-mid income borrowers with large balances, IDR plus 20-year forgiveness can be the cheapest path.
Generally: above 7%, pay aggressively. 5-7%, pay at the scheduled rate. Under 5%, invest the difference. If PSLF eligible, pay the minimum and invest. Always max the 401(k) match first regardless of loan strategy, that's free money.
Refinancing federal loans into a private loan trades: PSLF eligibility (gone forever), IDR plans (no income-based caps), forbearance options (much weaker on private), and death / disability discharge (varies by lender). Only refi if the cash math overwhelmingly wins and your career is stable.