Kassidy Wagner
Student Loans in 2025: Turning a Burden into a Benefit
May 13, 2025
How smart repayment strategies can help you save on taxes, build credit, and grow your future.
If you’ve resumed student loan payments recently, you’re not alone. Whether you’re working in a salon, running a business, farming, or managing your household budget, student loan repayment is now part of your monthly routine again.
You might also be wondering:
Can I still deduct student loan interest on my taxes?
Will loan payments slow down my ability to save for retirement?
What if I’m on one of those new income-based repayment plans—what happens now?
Could I lose my tax refund or wages if I fall behind?
Good news: With some smart planning—and a few recent federal changes—your student loan payments can support a stronger financial future. Here’s how.
1. Student Loan Interest Is Still Deductible
If you paid interest on qualified student loans in 2024, you can deduct up to $2,500 of that interest from your adjusted gross income (AGI)—even if you don’t itemize.
Who qualifies?
Income under $90,000 for single filers
Income under $185,000 for married filing jointly
This deduction reduces your taxable income and may help you qualify for other tax benefits.
2. New Retirement Benefit: Employer Matches on Loan Payments
Thanks to the SECURE 2.0 Act, if your employer offers this benefit, they can now match your student loan payments with a contribution to your 401(k) or similar retirement plan.
Here’s what it means:
You make your regular student loan payments
Your employer puts money into your retirement account—even if you aren’t contributing directly to it
This is a powerful new way to grow retirement savings for workers who may not otherwise be able to set aside money while repaying student loans.
Important Note: These employer contributions help build your retirement, but they don’t qualify you for the Saver’s Credit—and neither do your student loan payments. The Saver’s Credit only applies when you make voluntary contributions to retirement accounts from your own paycheck.
3. Student Loan Payments Can Help Your Credit
Consistent, on-time payments are one of the best ways to boost your credit score.
Why it matters:
A higher credit score can mean lower interest rates on mortgages, business loans, and vehicle financing
It helps show lenders that you’re reliable with debt
If you’re struggling with high monthly payments, consider enrolling in an Income-Driven Repayment (IDR) plan, which can lower your payments based on your income and family size—without damaging your credit.
4. What’s Going On With the SAVE Plan?
The Saving on a Valuable Education (SAVE) Plan was one of the most affordable repayment options for federal borrowers—but it hit a legal snag in 2025.
As of February 18, 2025: A federal court ruling temporarily paused key parts of SAVE and similar income-based repayment (IDR) plans, including:
Reduced monthly payment formulas
Interest subsidies
Some forgiveness tracking rules
Adjusted spousal income calculations
Easier forgiveness access for defaulted borrowers
What’s Still Active:
You can apply for other IDR plans (IBR, PAYE, ICR)
Loan consolidation remains available
StudentAid.gov and loan servicers are still active—though processing times may be longer
Action Step: Log in to your StudentAid.gov account or contact your loan servicer to confirm your current plan and payment schedule.
5. Forgiveness Isn’t Taxable (Through 2025)
If you qualify for student loan forgiveness—through PSLF, IDR, or any federal program—between Jan. 1, 2021 and Dec. 31, 2025, you won’t owe federal income tax on the forgiven balance.
Montana Bonus: Montana also does not tax forgiven student loan debt. So if you qualify for forgiveness while living here, it’s a true win—no federal or state tax bill.
6. Wage Garnishment: What to Watch Out For
If you fall behind on payments and go into default, the Department of Education can garnish your wages or intercept your tax refund. But that doesn’t happen overnight—and there are ways to avoid it.
To stay in good standing:
Apply for deferment, forbearance, or an IDR plan
Keep your contact and income info updated
Look into the Fresh Start Initiative if you’re already in default
Real-Life Scenarios
Alex in Missoula:
Income: $55,000
Student Loan Payment: $250/month
Interest Deduction: $1,800
Employer Match: $100/month into 401(k)
Result: Improved credit, growing retirement, prequalified for a mortgage
Lila in Kalispell (Salon Owner):
Income: $38,000
Loan Balance: $60,000
Payment Plan: SAVE (now moved to IBR)
Monthly Payment: $45
Employer Match: $50/month to her retirement
Many people don’t realize it, but with the right approach, student loan repayment can be a valuable part of building your financial future.
Final Thoughts: Student Loans Don’t Have to Hold You Back
With smart planning, your student loan payments can help you:
Lower your tax bill
Grow retirement savings
Boost your credit
Avoid default
Position yourself for future loan forgiveness
Need Help Connecting the Dots?
We’re here to help. Whether you’re farming, running a service business, or just trying to plan your financial future—our team can walk you through your best options.
Call, text, or stop by. Let’s make your next move a confident one.
How smart repayment strategies can help you save on taxes, build credit, and grow your future.
If you’ve resumed student loan payments recently, you’re not alone. Whether you’re working in a salon, running a business, farming, or managing your household budget, student loan repayment is now part of your monthly routine again.
You might also be wondering:
Can I still deduct student loan interest on my taxes?
Will loan payments slow down my ability to save for retirement?
What if I’m on one of those new income-based repayment plans—what happens now?
Could I lose my tax refund or wages if I fall behind?
Good news: With some smart planning—and a few recent federal changes—your student loan payments can support a stronger financial future. Here’s how.
1. Student Loan Interest Is Still Deductible
If you paid interest on qualified student loans in 2024, you can deduct up to $2,500 of that interest from your adjusted gross income (AGI)—even if you don’t itemize.
Who qualifies?
Income under $90,000 for single filers
Income under $185,000 for married filing jointly
This deduction reduces your taxable income and may help you qualify for other tax benefits.
2. New Retirement Benefit: Employer Matches on Loan Payments
Thanks to the SECURE 2.0 Act, if your employer offers this benefit, they can now match your student loan payments with a contribution to your 401(k) or similar retirement plan.
Here’s what it means:
You make your regular student loan payments
Your employer puts money into your retirement account—even if you aren’t contributing directly to it
This is a powerful new way to grow retirement savings for workers who may not otherwise be able to set aside money while repaying student loans.
Important Note: These employer contributions help build your retirement, but they don’t qualify you for the Saver’s Credit—and neither do your student loan payments. The Saver’s Credit only applies when you make voluntary contributions to retirement accounts from your own paycheck.
3. Student Loan Payments Can Help Your Credit
Consistent, on-time payments are one of the best ways to boost your credit score.
Why it matters:
A higher credit score can mean lower interest rates on mortgages, business loans, and vehicle financing
It helps show lenders that you’re reliable with debt
If you’re struggling with high monthly payments, consider enrolling in an Income-Driven Repayment (IDR) plan, which can lower your payments based on your income and family size—without damaging your credit.
4. What’s Going On With the SAVE Plan?
The Saving on a Valuable Education (SAVE) Plan was one of the most affordable repayment options for federal borrowers—but it hit a legal snag in 2025.
As of February 18, 2025: A federal court ruling temporarily paused key parts of SAVE and similar income-based repayment (IDR) plans, including:
Reduced monthly payment formulas
Interest subsidies
Some forgiveness tracking rules
Adjusted spousal income calculations
Easier forgiveness access for defaulted borrowers
What’s Still Active:
You can apply for other IDR plans (IBR, PAYE, ICR)
Loan consolidation remains available
StudentAid.gov and loan servicers are still active—though processing times may be longer
Action Step: Log in to your StudentAid.gov account or contact your loan servicer to confirm your current plan and payment schedule.
5. Forgiveness Isn’t Taxable (Through 2025)
If you qualify for student loan forgiveness—through PSLF, IDR, or any federal program—between Jan. 1, 2021 and Dec. 31, 2025, you won’t owe federal income tax on the forgiven balance.
Montana Bonus: Montana also does not tax forgiven student loan debt. So if you qualify for forgiveness while living here, it’s a true win—no federal or state tax bill.
6. Wage Garnishment: What to Watch Out For
If you fall behind on payments and go into default, the Department of Education can garnish your wages or intercept your tax refund. But that doesn’t happen overnight—and there are ways to avoid it.
To stay in good standing:
Apply for deferment, forbearance, or an IDR plan
Keep your contact and income info updated
Look into the Fresh Start Initiative if you’re already in default
Real-Life Scenarios
Alex in Missoula:
Income: $55,000
Student Loan Payment: $250/month
Interest Deduction: $1,800
Employer Match: $100/month into 401(k)
Result: Improved credit, growing retirement, prequalified for a mortgage
Lila in Kalispell (Salon Owner):
Income: $38,000
Loan Balance: $60,000
Payment Plan: SAVE (now moved to IBR)
Monthly Payment: $45
Employer Match: $50/month to her retirement
Many people don’t realize it, but with the right approach, student loan repayment can be a valuable part of building your financial future.
Final Thoughts: Student Loans Don’t Have to Hold You Back
With smart planning, your student loan payments can help you:
Lower your tax bill
Grow retirement savings
Boost your credit
Avoid default
Position yourself for future loan forgiveness
Need Help Connecting the Dots?
We’re here to help. Whether you’re farming, running a service business, or just trying to plan your financial future—our team can walk you through your best options.
Call, text, or stop by. Let’s make your next move a confident one.