Cut Your Student Loan Bills With Simple Income Tricks

A new student loan repayment plan will start on July 1. It is called the Repayment Assistance Plan, or RAP. Borrowers will pay a percent of their earnings each month. The more they earn, the higher the payment. People can lower those payments by cutting their pretax income. Small changes in wages before taxes are taken out can make a big difference over the year. For example, a person making $59, 999 a year may pay about $50 each month. If they earn $60, 000 instead, the monthly payment jumps. There are ways to reduce pretax income. Contributing more to a 401(k) or a traditional IRA helps, because those amounts are taken out before taxes. Adding $1, 001 to a pretax retirement account can lower the monthly payment from $414 to $350.Health savings accounts and flexible spending accounts are other options. Money put into these accounts also reduces taxable wages. Self‑employed borrowers can write down business expenses and health insurance costs on their Schedule C. RAP also gives a $50 cut for each dependent listed on the tax return. That includes children and sometimes other relatives. The savings happen automatically when filing taxes. Even with lower monthly payments, RAP may cost more over time. The plan only forgives debt after 30 years, longer than other plans that forgive in 20 or 25 years. Borrowers should compare total costs before deciding.