student-loan-strategist

Use when comparing student loan repayment paths (standard vs extended vs graduated vs income-driven), planning PSLF qualification, sizing extra payments, or projecting forgiveness tax bombs. Runs real amortization and discretionary-income math and ranks strategies by total cost and payoff date.

Overview

Student debt decisions are made once (at exit counseling or on a servicer website) and then never revisited — yet the difference between repayment plans is routinely $20,000–$80,000 in extra interest or a five-figure forgiveness tax bill nobody saw coming. Servicers present plans as a menu without showing 20-year totals; borrowers pick the lowest payment and lose.

This skill is a decision instrument: given balances, rates, income, and family size, it runs real amortization and cash-flow simulations for every major federal plan shape and ranks them honestly — including the income-driven (IDR) "forgiveness" trap, where the discharged balance at year 20/25 is taxable income (the "tax bomb").

When to Use

• Borrower with one or more student loans asks "which plan should I pick?"
• Comparing extra payments / avalanche vs staying on an income-driven plan
• Tracking PSLF progress (120 qualifying payments) and projecting the forgiveness date
• Estimating the IDR forgiveness tax bomb at year 20/25
• Deciding whether refinancing federal → private makes sense (federal protections lost)
• Recertification panic: "what happens if my income drops / I lose my job?"

Don't use for: private loan payoff alone (no IDR/forgiveness logic needed — plain avalanche math still works), or tax filing advice. Always state figures are estimates: servicer rounding, income growth, and rule changes (REPAYE/SAVE litigation) shift results.

The Math Core

Discretionary income (federal definition)

text

poverty_line_2025 = {1:15060, 2:20440, 3:25820, 4:31200, each_extra:5380}
discretionary     = max(0, AGI - 1.5 * poverty_line(family_size))
IDR payment      = 10% (old IBR/PAYE undergrad) or 15% (old IBR grad / ICR) of discretionary

Rules encoded:

• Payment recalculates annually after recertification (default income growth 3%/yr).
• PAYE-style cap: IDR payment never exceeds the 10-year standard amount.
• If payment < monthly interest, balance grows (negative amortization). The model tracks unpaid interest realistically (it accrues; under PAYE it capitalizes only above 10% of original principal — simplified here as immediate accrual, flagged as conservative).
• Forgiveness horizon: 240 payments (20 yr) if all loans are undergrad, 300 (25 yr) if any graduate loan. Forgiven amount is taxed as ordinary income in the forgiveness year (currently no exclusion through 2025 law sunset — always model the bomb).

PSLF

• 120 qualifying payments while employed full-time by government/501(c)(3) on a qualifying plan (any IDR or 10-year standard). Payments need not be consecutive.
• PSLF forgiveness is tax-free (federal; some states differ — flag for NY/MS states).
• Refinancing to private destroys PSLF eligibility permanently.

Numbered Workflow

1. Collect inputs: per-loan (balance, APR, undergrad vs grad), AGI, family size, marginal tax rate, employment (PSLF-eligible?), payments already made, extra $/mo available.
2. Run scripts/loan_compare.py — it simulates every strategy:
   • Standard 10-yr, Extended 25-yr, Graduated 10-yr (bisect-solved step schedule)
   • IDR 10% and 15% (annual recertification, PAYE cap, forgiveness + tax bomb)
   • Avalanche with optional extra payment
3. Read the ranked table: total paid, payoff/forgiveness date, interest, and the forgiveness line (gross discharged / net after tax bomb).
4. Cross-check plan-choice pitfalls below, then give ONE recommendation with the reasoning ("lowest total cost" is not always right — PSLF seekers should minimize payments).
5. For PSLF users run with --pslf --payments-made N to get the projected tax-free forgiveness date and the "do not pay extra" verdict.

Plan-Choice Pitfalls

1. Picking the lowest payment without the 20/25-yr total. Extended 25-yr often costs 2–3× the interest of standard 10-yr. The tool shows both.
2. Forgetting the tax bomb. IDR forgiveness at 20/25 yr is taxable income: a $90,000 discharge at 22% marginal = ~$19,800 due in one year. Model a sinking fund (bomb/240).
3. Losing PSLF by refinancing or by switching to extended/graduated (non-qualifying).
4. Recertification lapse → payment snaps to standard 10-yr amount + unpaid interest capitalizes. Set the annual reminder; the script prints the next deadline.
5. Extra payments on IDR without targeting. Extra on avalanche = good if staying to payoff; wrong if PSLF-bound (every extra dollar is a dollar not forgiven).
6. Graduated plan trap: late-step payments can exceed the borrower's income growth; the script's solved schedule exposes the final-step payment.
7. Private refinance only beats federal when the rate cut is large (≥1.5–2 pts) and the borrower accepts losing IDR/PSLF/forbearance safety nets.

Example Session

text

$ python3 scripts/loan_compare.py --balance 38000 --rate 6.2 --grad \
    --agi 52000 --family 2 --marginal 22 --extra 150

Strategy              Payment(1st/last)  Payoff/Forgiven  Total paid   Interest
Standard 10-yr        $425/$425          2036-04          $51,047      $13,047
Extended 25-yr        $248/$248          2051-04          $74,502      $36,502
Graduated 10-yr       $290/$618          2036-04          $53,880      $15,880
IDR 15% (25-yr)       $294/$386          FORGIVEN 2051-04 $88,315      — $61,623 discharged,
                                                             tax bomb ≈ $13,557 (22%)
Avalanche +$150/mo    $575/$575          2033-05          $45,690      $7,690

VERDICT: Avalanche+$150 pays least overall (2033). If PSLF-eligible, stay on IDR 15%,
  pay minimum, forgiveness ~2051-04 is TAX-FREE under PSLF — total paid ≈ $88k regardless.

Verification Checklist

• Balance(s), rate(s), AGI, family size confirmed with the user
• Poverty-line multiple (1.5×) and forgiveness horizon (20 vs 25 yr) correct for their loans
• Tax bomb shown in gross AND net terms
• PSLF users warned against extra payments and refinancing
• Recertification date on the calendar
• Figures labeled as estimates; rule changes flagged (SAVE/REPAYE litigation)