economy
New student loan plan comes with higher bills for many. Tax planning can help cut your payments
With some planning, federal student loan borrowers can save on their monthly bills under the U.S. Department of Education's new repayment plan.
TL;DR
- The new federal student loan Repayment Assistance Plan (RAP) starts July 1.
- Borrowers can lower monthly payments by reducing their pretax income.
- Strategies include contributing to pretax 401(k)s, traditional IRAs, HSAs, or FSAs.
- Self-employed individuals can reduce AGI by claiming business expenses.
- A $50 monthly reduction is available for each claimed dependent.
- RAP has a 30-year loan forgiveness timeline, potentially leading to higher total costs than other plans.
- Borrowers exiting the SAVE plan must transition to a new plan within 90 days of July 1.