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Theoretically it should. But four things to consider:

1) taxable income of that amount is far, far better than actually having to pay the amount. If you are in the IBR program, you are in the 15% bracket or lower. So you would pay as federal tax, at most, 15% of the remaining sum.

2) Who knows what tax policy will be in year 2034. It could be deemed to be federal tax free, similar to current principal residence short sales, or it could be a special rate. We just don't know. Way too speculative to even make a guess at this point.

3) The IBR program may not survive 25 years.

4) You may generate sufficient earning power during that period to be removed from the program.

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