Student loans are often top of mind for many people in the early stages of a professional career. You’ve made an investment in yourself by getting a great education, and now you’ve got to make enough money to build a life, but also to repay those loans. The main piece of advice we give most of our clients with student loans is not about numbers. It’s about overcoming the feeling that this debt is a very heavy burden. So if you’re in that camp, we have some thoughts to share:
Own It – These Student Loans Are Your Responsibility!
Taking out these loans was ultimately your choice, so own it. You DID in fact have other options – you could have gone to a cheaper school, or stretched your education out as you worked your way through. Whatever the case, ultimately it is your signature on the loan form. Take responsibility.
Don’t Let Student Loans Tyrannize You – Make a Plan and Enjoy Life
Student loan payoff is possible, with a plan. Make the plan, implement it, and review it periodically. Then leave it alone! Be patient. Don’t let student loans tyrannize you or prevent you from enjoying life. Most importantly, stick with the plan. If you know that paying $600 per month for 15 years will pay off your loans, then simply stay the course. A helpful student loan payoff calculator is available at SoFi.com.
The question of how to tackle your student loans depends on your career route – either public or private sector.
Public or Private Sector Employment
Student Loans – Public Sector Career
A significant percentage of the U.S. labor force works in the public sector, and those employees are generally eligible for loan forgiveness in as little as 10 years through the Public Service Loan Forgiveness (PSLF) program. If you work for a qualifying public employer and consistently make the required payments every month over 10 years (120 qualifying payments), the remaining balance of your loan can be wiped out.
Private Sector Careers
For most of us, we’ll establish our careers in the private sector where there is generally higher earnings potential. Refinancing is often a good idea if the loan outstanding is big enough, you have good credit, and some employment history. In some cases, you just need proof of future employment. If you currently have a high interest rate, there are good companies out there such as SoFi* that help you reduce the amount of interest you pay over the life of your loan. Finally, make sure you understand the refinancing terms on your student loans. On principle, consolidating large loans at a lower rate is just common sense.
Warning: Refinancing federal loans into private loans may offer a lower interest rate, but it permanently eliminates access to federal forgiveness programs (including PSLF and IDR forgiveness), federal deferment and forbearance protections, and income-driven repayment options. Think carefully before refinancing federal loans.
Student Loan Income-Based Repayment Plans
If you have a relatively low income now, and expect it to rise steadily in the ensuing years, an income-driven repayment (IDR) plan may be for you. Each year you report your earnings via your tax return and a new payment is calculated for you.
Critical Tax Update for 2026 – The “Student Loan Tax Bomb” Is Back
Starting in 2026, student loan forgiveness under IDR plans will again count as taxable income at the federal level. This means the original “tax bomb” warning is once again fully in effect. The forgiven balance could push you into a significantly higher tax bracket in the year it is discharged, potentially resulting in a very large, unexpected tax bill.
Note: Borrowers who became eligible for forgiveness in 2025 but whose debt was not officially discharged until 2026 may still qualify for the tax-free treatment if they can document their 2025 eligibility date. Save any dated eligibility confirmation letters. Additionally, state income tax treatment on forgiven loans varies – check your state’s rules. Consult a tax professional well in advance of your expected forgiveness date to plan accordingly.
Make a Student Loan Payoff Plan
Come work with us to figure out how to begin paying down your student loans in earnest. We’ll create a cash flow statement together – your budget – and work with you from there to establish your personal plan to fulfill the promise to pay that you made when you took out the loans. The idea is to take control of your money so it is not in control of you.
Some related blog posts you may find useful:
Quick Reference: Key Considerations (2026)
- Public Sector / PSLF: Forgiveness after 120 qualifying payments (10 years). PSLF forgiveness remains tax-free under a permanent statutory exclusion. New employer eligibility rules take effect July 1, 2026 – verify your employer’s status at StudentAid.gov.
- Private Sector Refinancing: Can lower your interest rate and total cost, but permanently eliminates access to federal forgiveness programs and protections. Weigh the tradeoffs carefully before refinancing federal loans into private loans.
- IDR Forgiveness – Tax Bomb Reinstated: Forgiveness after 20–25 years (or 30 years under the new Repayment Assistance Plan from July 2026). The forgiven balance is now taxable as ordinary income at the federal level starting in 2026. Plan ahead.
- SAVE Plan Ended: The Biden-era SAVE repayment plan has been terminated. New borrowers enrolling from July 2026 will generally choose between a Revised Standard Plan or the new Repayment Assistance Plan (RAP).
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Notes & Disclaimers
* While not a recommendation of SoFi, it is mentioned as a leading provider for refinancing student loans.
This document is an updated version of the original blog post published at cameron-downing.com on January 31, 2020, by Jonathan G. Cameron, CFP®. Tax law updates reflect changes effective as of April 2026.
This document is for informational purposes only and does not constitute legal, tax, or financial advice. Student loan laws and regulations are subject to frequent change, including ongoing litigation. Consult a qualified financial advisor and tax professional for advice specific to your situation.
