Strategy 93 of 107 · new for the five-year plan
Let your employer pay student loans tax-free, then roll that payment
What it is
Ask whether your employer offers educational assistance that pays student loans; up to $5,250 a year is tax-free.
Steps
- Ask whether your employer offers educational assistance that pays student loans; up to $5,250 a year is tax-free.
- Your own student loan payment drops or ends.
- Send what you no longer pay to principal.
Repeat: Every year.
Measure: Monthly student loan payment freed.
Try it in the calculator Enter its amount in "Monthly non-income amount to principal". Add a payoff goal of 5 years to see what is still needed.
Risks
- Not every employer offers it.
- Plan rules and limits apply.
Who it fits
Single, Newlyweds, Married couples, College students, Average household, Higher earners
Needs
Has student loans
How predictable
Most predictable: once in place, the payoff date is arithmetic
A worked example (hypothetical, not guaranteed)
Picture a hypothetical household (single). They owe $300,000 at 6.5% with 30 years left. The required payment is $1,896 a month, and that payment, which comes from income, never changes in this example.
They follow the steps: ask whether your employer offers educational assistance that pays student loans; up to $5,250 a year is tax-free.
Suppose it brings $150 a month on principal from this strategy, not from the paycheck. The loan would be paid off in 24 years 5 months instead of 30 years, saving about $83,919 in interest. To finish in five years, they would still need about $3,824 a month more from other strategies. That is why the five-year sequences stack several at once.
The amount above is chosen only to show the arithmetic. It is not an estimate of what this strategy will produce for anyone. Put real numbers from the fact finder into the calculator.
Sequences that use it
- Student loans gone, then the house: Every student loan payment that ends becomes a principal payment the next month.
Sources and more information
Where to get help
Related strategies
- 92. Owners of an S or C corporation: get reimbursed tax-free for home office and mileage
- 94. Public service loan forgiveness, then roll the payment
- 91. Ministers: a designated housing allowance
- 95. Teacher forgiveness or disability discharge for student loans
- 90. Run a licensed adult family home
- 89. Board horses on pasture or in a barn you already have