I am currently enrolled in IBR with a monthly payment of approximately $70. I have a very large amount of student loan debt (around $180,000). I enrolled in IBR after they made my payment under the standard repayment plan $2000/mo (which wasn’t feasible). I feel like with such a little payment under IBR I will never be able to pay off the loan, especially with the accruing interest. My family could pay more than the $70/mo but I don’t know if that is the best option since my loan can be forgiven after 25 years. So my question is—should I be paying the maximum amount that I am financially able to pay each month or should I stick with the minimum payment I am making with IBR and count on the loan being forgiven after 25 years?  I am also concerned with the taxes that are due on the forgiven balance—will this be a substantial amount?  I just want to make sure I am doing the right thing by sticking with IBR.  Thanks!

Hawk,

You are thinking about the right considerations.  Your goal is to balance a number of factors, some of which you can’t know for sure, including:
the amount you owe
the amount you earn
your future expected earnings (tricky to project, of course)
your access to additional funds
the tax consequences of loan cancellation, and
your other personal and financial circumstances.

It is certainly true that the longer it takes to repay the debt, the more it will cost over time.  So on the one hand, it makes sense to repay the debt as quickly as you can.  But consider also whether you have an emergency fund saved, whether you have health insurance, whether you owe other debt with less favorable terms, etc. 

As for whether the taxes could be substantial, the answer is YES, they could be.  The current rule is that the forgiven amount is taxable as income in the year in which it is forgiven.  If you are on track for forgiveness, you absolutely should plan ahead for that.

Hope this helps,
Heather