Student loan debt, PSLF, planning for future

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truepat76
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Student loan debt, PSLF, planning for future

Post by truepat76 » Thu May 04, 2017 10:04 pm

Hello everyone,
I was hoping to get some feedback on what people would do in my situation.

I'm a 26 y/o F recently and recently graduated from graduate school. I currently owe $129,000K in student loan debt. All of these loans are direct federal loans (rates vary from 3.4% from my undergraduate degree to 7.2% from my graduate degree GRAD Plus loans). I just started working last month and will make about $115,000 a year. I have not started to contribute to my 403B plan yet (employer will not match until I have worked there for 1 year) because I wanted to get a better idea of the best financial decisions to make.

My S/O makes about $40,000 a year. They are currently finishing up their own degree and will owe about $85,000K in student debt once they're done. The loans won't go into repayment until 1 year from now. The degree will hopefully give them a considerable salary increase ($20,000+/year). They're currently putting away 10% of their income into a 401K.

We're both young and want to purchase a house & get married in the foreseeable future (~2-4 years), while making sure we aren't neglecting saving for retirement. Our current living situation is very fortunate (400/month rent with family), but we have been (nicely) asked to get our own place within the next 2 years. They need the space we're occupying. Cost of living in our area is quite high and renting an apartment would cost at least $1,100/month.

My questions/concerns:
-I have planned on using PSLF for my loans. I work in healthcare and there are tons of jobs in 501c3 institutions. Is this a dumb idea considering that we plan to get married before my loan balance would be forgiven in 10 yrs? Under the standard repayment plan based on just my income, it would be $1,500/month for 10 years. If I choose to pursue PSLF I would do REPAYE ($750/month based on my income). My concern is that once married and filing jointly, our combined AGI will be too high and it will basically make PSLF pointless?

-In terms of our living situation - we want to purchase a home ($250,000-275,000 in our area for a reasonable starter home). I know there will be a lot of unexpected costs required to maintain the home, but I still think it may be a better idea than renting. On the other hand, I know people will say that taking out more debt in addition to the student loan debt is a stupid idea. I see both sides of it, but at the end of the day we need to be out of our current situation, and all of the student debt is just an additional burden.

** I know the 100% ideal situation would be - stay in our low-rent situation while living frugally and throwing every cent we have at our debt for 3-4 years until we're debt free (like Dave Ramsey would suggest). Unfortunately, that can't happen since we need to be "out" in the near future :(

-Potential situations:
A) - Go for PSLF as I planned. My S/O will likely pursue PSLF as well once they finish their degree. Build up an emergency fund, Purchase a modest home, continue to contribute to retirement funds (I'd put at least 10% away). Hope that PSLF is not capped/modified. Down the line once we get married, continue to make payments on REPAYE (even though they'll be comparable to the standard plan).

B) Use the time we have left in the low-rent situation to do two things: save up a set amount each month for a down payment for a home, saving 10% to retirement, then throwing all extra $$ towards my loans. Once we have enough saved for a down payment & emergency funds, purchase modest home and then continue paying off loans on the standard repayment schedule of 1,500/month.

C) Cry because this is all so overwhelming :shock:

Sorry for the long post, I'd appreciate any input. Thanks so much.

brajalle
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Re: Student loan debt, PSLF, planning for future

Post by brajalle » Fri May 05, 2017 6:53 am

You should do more research on PSLF. The basics though are - if you and your spouse are enrolled, there is still an income % calculation, but it includes both of your loan amounts if I recall. Like I said, look it up yourself, because I never paid too close attention to those calculations because it didn't apply to my family.

You can file married filing separately. This lets you claim your spouse as a household member for calculations still, but only include your income. Be advised this can limit your contributions and deductions in other areas (notably, no education credits/deductions whatsoever, also really axes your Roth IRA contributions/etc). If you get an extension and file intelligently, you can even conceivably file to amend about 2 years later as married filing jointly for those other credits (and be long past the IBR calcs). Please consult a tax professional though before doing any of that (INAL or an accountant).

As you might imagine, there are millions looking to take advantage of PSLF given the massive student loan debt of our generation, and there's also a good chunk of people doing the MFS thing (we are).

I will caution you against relying on PSLF in several ways. It may very well be there in 120 payments. It also may not, as it's projected to cost huge amounts of money for the forgiveness. They also may crack down on the married filing separately thing. They could also not make it apply to current people, only future, or it may never be changed - who knows. My point is, just be aware there is some uncertainty in the programs, and not just with your ability to maintain 120 payments in a position covered under the PSLF.

awval999
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Re: Student loan debt, PSLF, planning for future

Post by awval999 » Fri May 05, 2017 7:00 am

I would do REPAYE/PSLF for now and see if/when/how the Higher Education Act is reauthorized this year and what changes are made. Regardless of what I "expect" to occur, it doesn't matter, and isn't applicable to this forum anyway.

However, I predict you'll at least "know" how to proceed within the next year. So you aren't making a 10 year commitment today.

emperorcorey
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Re: Student loan debt, PSLF, planning for future

Post by emperorcorey » Fri May 05, 2017 8:44 am

I'm currently on IBR and in year six of PSLF. ! graduated with 175k+ in loans. In the six years I've been in repayment, I got married, bought two cars, bought a house, sold a house, bought another house, and had a child. Your loans may seems overwhelming, but you'll be fine.

My total salary last years was ~95k, and my spouse's was ~55k. My monthly IBR payment is ~$400. Here's my advice:

1) Contribute as much as you possibly can to your 403b in order to reduce your AGI. Every dollar added to your AGI adds either 15 cents or ten cents to your yearly repayment amount. So contributing 18k to your 403b would save you $225/month (IBR) or $150/month (PAYE or REPAYE).

2) Consider which plans you're eligible for. PAYE is 10% of AGI and allows you file separately, but is not available to those with pre-October 2007 federal loans. For those with pre-2007 loans, IBR is 15% of AGI and allows you to file separately. REPAYE opened up the 10% plan to everyone, but does not allow you to file separately. You can switch between plans, but the interest on your loans will capitalize when you leave a plan. That may not matter if you're positive you'll do the full ten years for PSLF.

3) Carefully consider how you file your taxes. I have found that married-filing-separately has always been the better option, especially since I live in a community property state. In a community property state, the spouse's split their incomes on their tax returns, so your AGI decreases if your spouse makes less than you. If you do not live in a community property state, it may be a closer call. I do my taxes by hand every year to calculate the difference between joint and separate filings and compare it to what I would save on my repayment.

4) When you re-certify your income, you use the "most recent" tax return. I always delay filing my taxes until after I recertify my repayment plan, so that I am able to use the tax return from two years prior. This year, I recertified in February using my 2015 tax return. So my 2015 income is used to calculate my payments in 2017-2018.
Last edited by emperorcorey on Fri May 05, 2017 9:32 am, edited 1 time in total.

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knpstr
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Re: Student loan debt, PSLF, planning for future

Post by knpstr » Fri May 05, 2017 9:15 am

Generally speaking I wouldn't do any mix-finances (you paying off his stuff, and vice versa or buying things together) until you are actually married.

Next, while you (or the both of you) have a fair amount of debt, you also have a fair amount of income. I wouldn't be too stressed about it. I do think you should be concerned and want to pay it off but I wouldn't feel overwhelmed by it.

$129,000 loans is a lot of debt but on $115,000 income it isn't insurmountable.

Do either of you have auto loans or credit card debt? That could be an important factor in your decision.

Also weddings aren't very cheap (at least what people want to pay for their own) , so that is another concern.

All of these things should be put in front of a house purchase. But the price of home you're looking at does seem reasonable in your situation.
Very little is needed to make a happy life; it is all within yourself, in your way of thinking. -Marcus Aurelius

runner540
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Re: Student loan debt, PSLF, planning for future

Post by runner540 » Fri May 05, 2017 9:21 am

I'm not familiar with the details of PSLF so will leave that to others.

You mentioned this is all overwhelming: you do have a lot of goals, so I'd suggest tabling the house buying for now. Just don't worry about that now: focus on finishing school, repaying student loans, saving for retirement. When you need to leave your family rental, plan on renting again.

Here's why: $1,100 in rent, even for a 1 BR, doesn't sound HCOL to me and is reasonable on your combined incomes. I'm guessing that you have heard from the media, family and friends that buying is better than renting, full stop. Spend some time with the NYT buy/rent calculator to see the true cash flow and opportunity costs for buying and renting.

If you both do PLSF, you've just put a significant limitation on where you can work for 10 years. Don't add another by tying yourself to a house. Stay flexible on that until you've paid down loans significantly, built a good retirement account and have some clarity on PLSF after a few years working are under your belt.

You can still save in a taxable account, and use it later for a down payment or student loans if something makes PLSF not work out for you.
Good luck!

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truepat76
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Re: Student loan debt, PSLF, planning for future

Post by truepat76 » Fri May 05, 2017 12:04 pm

Thank you all so much.

Emporercorey - it looks like you're on a great path for PSLF! That is great your payments are that low each month. We certainly need to talk to a tax professional to figure out what will be the best for us in regards of MFJ vs MFS. I looked and unfortunately our state is not a "community property" state.

I agree with those saying that PSLF still isn't a guarantee. But by the end of the year I'm sure I'll have a better idea of if it will stick around or if there will be major changes. Others have told me even if there are major changes, they will likely only apply for new borrowers and we'll be "grandfathered" in. But, we will have to wait and see. All of my loans were taken out after 2007.

I know the wedding situation will be another financial stress. However, I think we will be blessed with some help from family members on his side. This is obviously a ways away (not engaged yet), but we have talked about it a lot and it will likely happen within the next 5 years. I just want to include it in my near-future finances since it can be quite pricey as you said.

I'll definitely look at the NYT calculator. You're right, basically everyone I've talked to said that renting is basically throwing away $$. I think in terms of starting a family etc, it would be ideal to buy a starter home. We would not go over the top and buy anything above $300,000 or so. Our plan would be to stay there for at least 10 years.

PSLF definitely ties me into working for non-profits only, but literally 75%+ of jobs that i'd be interested in having in my area are at non-profit hospitals. "For-profit" healthcare in my area is not very common. Plus, I'd be 36 by the time my loans are forgiven. At that point, I could transition to a for-profit job if I really desired it. Like you mentioned runner540, I was planning on putting the money I'll "save" on my monthly loan payments (by doing REPAYE as opposed to the standard repayment plan) into a taxable savings account. That way if anything were to happen with PSLF, or I change my mind down the line, I could throw a huge lump sum at my loans.

My car (2011) is fully paid off and low miles. It should last me quite a while. I have 1 credit card and pay my bill in full each month (usually $150/month, I mostly use it for gas because it gives me cash back rewards). My credit score is 760, his is 740 (just opened his first card last year). He needs a new car this fall (current car is 16 years old and the cost of maintaining it is getting ridiculous. He's hoping to purchase a slightly used SUV that will last him 10+ years. Max of $12,000)

As you mentioned Knpstr, we are keeping finances separate until we are married. However, we do split a cell phone bill (he pays me $60/month for our 2 line plan). All bank accounts etc are separate.

Thank you again.

rzk96
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Re: Student loan debt, PSLF, planning for future

Post by rzk96 » Fri May 05, 2017 9:10 pm

Seems like people on here have given great tips.

... I just wanted to say don't cry! Once you get the hang of things, you'll get this debt DONE!

JimmyD
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Re: Student loan debt, PSLF, planning for future

Post by JimmyD » Sat May 06, 2017 1:14 am

Just to add our situation to the mix, my wife has $235k in student loan debt and we are on year six of IBR / PSLF. Payments are currently $650 / month. The advice given re: maxing out the 403b and filing taxes separately is spot on.

FYI PSLF is written into your master promissory note and would take a literal act of Congress to amend. If it comes down to it, do not take any changes lying down. Personally, I'll be taking legal action if we are negatively impacted by any future changes.

Cannot wait to get this debt off the books.

h82goslw
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Re: Student loan debt, PSLF, planning for future

Post by h82goslw » Sat May 06, 2017 5:20 am

JimmyD wrote:Just to add our situation to the mix, my wife has $235k in student loan debt and we are on year six of IBR / PSLF. Payments are currently $650 / month. The advice given re: maxing out the 403b and filing taxes separately is spot on.

FYI PSLF is written into your master promissory note and would take a literal act of Congress to amend. If it comes down to it, do not take any changes lying down. Personally, I'll be taking legal action if we are negatively impacted by any future changes.

Cannot wait to get this debt off the books.
I have a kid going into medical field and will have a fair amount of debt upon graduation, so we've talked about PSLF and I try to follow current events on this. When you say "I'll be taking legal action" what exactly do you mean?

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Dendritic Tree
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Re: Student loan debt, PSLF, planning for future

Post by Dendritic Tree » Sat May 06, 2017 5:50 am

Cautionary tale: my wife and I are both physicians who have massive combined student loan debt (over 600k) and have been paying by IBR while in training and early career (she's been out in the "real world" a few years longer because my residency/fellowship was so long). We have both worked for a 501(c)3 the entire time. The government denied our certification letter to qualify for PSLF without any explanation, and it looks like this has happened to other folks, too:

https://www.nytimes.com/2017/03/30/busi ... fined&_r=0

So now we've made much smaller payments than we should for a few years in hopes of getting a huge chunk of loans forgiven, which isn't going to happen. During that time the interest has ballooned massively on our loans. You better believe we refinanced all of it at an interest rate less than half of our original federal loans (which were mostly at 6.8% - a few at 8.0%) and are now paying as aggressively as possible to try to make the loans go away ASAP. The whole PSLF endeavor has been one of my biggest regrets in financial life, because I thought it was going to be a sure thing so I paid much less than I should have for several years, allowing interest to explode on my loans.

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unclescrooge
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Re: Student loan debt, PSLF, planning for future

Post by unclescrooge » Sat May 06, 2017 5:57 am

Out of idle curiosity, since mortgage interest deductions lower your AGI, would buying a house lower one's monthly PAYE/IBR payment over renting?

JimmyD
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Re: Student loan debt, PSLF, planning for future

Post by JimmyD » Sat May 06, 2017 6:14 am

h82goslw wrote:
JimmyD wrote:Just to add our situation to the mix, my wife has $235k in student loan debt and we are on year six of IBR / PSLF. Payments are currently $650 / month. The advice given re: maxing out the 403b and filing taxes separately is spot on.

FYI PSLF is written into your master promissory note and would take a literal act of Congress to amend. If it comes down to it, do not take any changes lying down. Personally, I'll be taking legal action if we are negatively impacted by any future changes.

Cannot wait to get this debt off the books.
I have a kid going into medical field and will have a fair amount of debt upon graduation, so we've talked about PSLF and I try to follow current events on this. When you say "I'll be taking legal action" what exactly do you mean?
For starters, unless it is too late, I would encourage him to forget about PSLF. It is simply too risky of a move the way things stand now.

If he already went down that rabbit hole however, it is imperative that all loans meet every single criteria. Every payment has to made on time. Employers have to be qualified non-profits. Fully understand every single requirement and ensure you meet them and more importantly, ensure you can meet them for the length of the program - 10 years. Not always a sure thing.

As for legal action if negatively impacted, I'll simply gather all of my documentation, approval letters, payment histories, and master promissory note that clearly states the loans will be forgiven in ten years (with no mention of cap) and hire an attorney to file a lawsuit against the appropriate party.

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truepat76
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Re: Student loan debt, PSLF, planning for future

Post by truepat76 » Sat May 06, 2017 9:43 am

Dendritic Tree wrote:Cautionary tale: my wife and I are both physicians who have massive combined student loan debt (over 600k) and have been paying by IBR while in training and early career (she's been out in the "real world" a few years longer because my residency/fellowship was so long). We have both worked for a 501(c)3 the entire time. The government denied our certification letter to qualify for PSLF without any explanation, and it looks like this has happened to other folks, too:

https://www.nytimes.com/2017/03/30/busi ... fined&_r=0

So now we've made much smaller payments than we should for a few years in hopes of getting a huge chunk of loans forgiven, which isn't going to happen. During that time the interest has ballooned massively on our loans. You better believe we refinanced all of it at an interest rate less than half of our original federal loans (which were mostly at 6.8% - a few at 8.0%) and are now paying as aggressively as possible to try to make the loans go away ASAP. The whole PSLF endeavor has been one of my biggest regrets in financial life, because I thought it was going to be a sure thing so I paid much less than I should have for several years, allowing interest to explode on my loans.
What a nightmare!! Had they been accepting the certification letters up to a certain point, and then suddenly denied you? That is ridiculous. I wonder if an attorney would have been any help. Anyways, I do fear your exact situation, but I try to be optimistic. This is one of the reasons I keep going back and forth between if I should pursue PSLF vs the standard repayment plan at 1,500/month. Ugh.

rzk96 wrote:Seems like people on here have given great tips.

... I just wanted to say don't cry! Once you get the hang of things, you'll get this debt DONE!
Thank you! And yes it will be a great feeling :sharebeer
JimmyD wrote: For starters, unless it is too late, I would encourage him to forget about PSLF. It is simply too risky of a move the way things stand now.

If he already went down that rabbit hole however, it is imperative that all loans meet every single criteria. Every payment has to made on time. Employers have to be qualified non-profits. Fully understand every single requirement and ensure you meet them and more importantly, ensure you can meet them for the length of the program - 10 years. Not always a sure thing.

As for legal action if negatively impacted, I'll simply gather all of my documentation, approval letters, payment histories, and master promissory note that clearly states the loans will be forgiven in ten years (with no mention of cap) and hire an attorney to file a lawsuit against the appropriate party.
JimmyD - are you suggesting they avoid PSLF due the current political administration and thinking they'll try to make major changes? Or do you just regret pursuing it for other reasons (being tied to nonprofits)? Hopefully you'd never need to pursue legal action, but sounds like you're prepared to do so if needed (and I'm sure thousands of others out there would do the same)

TIAX
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Re: Student loan debt, PSLF, planning for future

Post by TIAX » Sat May 06, 2017 10:06 am

truepat76 wrote: I'm a 26 y/o F recently and recently graduated from graduate school. I currently owe $129,000K in student loan debt. All of these loans are direct federal loans (rates vary from 3.4% from my undergraduate degree to 7.2% from my graduate degree GRAD Plus loans). I just started working last month and will make about $115,000 a year. I have not started to contribute to my 403B plan yet (employer will not match until I have worked there for 1 year) because I wanted to get a better idea of the best financial decisions to make.
You should max out the 403(b) despite no match to reduce your taxes. As for whether to use PSLF, (1) how much more can you make in the private sector?; and (2) are you sure you'll stay in public/non-profit for a decade? If you could make even a bit more in the private sector, I would do that and refi into a 2.35% loan. See also this site on refinancing - http://whitecoatinvestor.com/student-loan-refinancing/

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truepat76
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Re: Student loan debt, PSLF, planning for future

Post by truepat76 » Sat May 06, 2017 10:15 am

TIAX wrote:
truepat76 wrote: I'm a 26 y/o F recently and recently graduated from graduate school. I currently owe $129,000K in student loan debt. All of these loans are direct federal loans (rates vary from 3.4% from my undergraduate degree to 7.2% from my graduate degree GRAD Plus loans). I just started working last month and will make about $115,000 a year. I have not started to contribute to my 403B plan yet (employer will not match until I have worked there for 1 year) because I wanted to get a better idea of the best financial decisions to make.
You should max out the 403(b) despite no match to reduce your taxes. As for whether to use PSLF, (1) how much more can you make in the private sector?; and (2) are you sure you'll stay in public/non-profit for a decade? If you could make even a bit more in the private sector, I would to that and refi into a 2.35% loan. See also this site on refinancing - http://whitecoatinvestor.com/student-loan-refinancing/
Truthfully, most jobs in my area are nonprofits in my field. The only private sector jobs that wouldn't qualify are outpatient urgent care centers where I might make $10/hour more. But, I could always pick up extra shifts as per diem there while staying full time at a nonprofit until I'm 36. At this point, I could not see myself working full time at one of these urgent care centers.

TIAX
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Re: Student loan debt, PSLF, planning for future

Post by TIAX » Sat May 06, 2017 10:23 am

truepat76 wrote: Truthfully, most jobs in my area are nonprofits in my field. The only private sector jobs that wouldn't qualify are outpatient urgent care centers where I might make $10/hour more. But, I could always pick up extra shifts as per diem there while staying full time at a nonprofit until I'm 36. At this point, I could not see myself working full time at one of these urgent care centers.
I see. And $10/hour more would be $20-30k more a year ? I would think that's worth it unless there's some reason one wouldn't want to work at an urgent care center. Also, is there a chance you might move to an area with higher salaries in the next 10 years?

Keep in mind that those extra shifts will raise your PLSF payments.

In any case, if you refi 130k at the 2.35% fixed 5 year rate, your total payments over the life of the loan would be $137,940. What do you expect your total PSLF payments to be? Don't forget to consider your SO's projected income if you get married.

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truepat76
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Re: Student loan debt, PSLF, planning for future

Post by truepat76 » Sat May 06, 2017 10:33 am

As of right now I'm not really interested in doing urgent care. My professional allows me to switch specialties though, so it may be something I consider down the line.

I haven't been able to work for the past 3 years due to my school program, so my payments for this year would be $0 under REPAYE.
Next year (since I'm starting my job half way through this year) - it'll be about 350/month
The following year about $800/month on my current income.

Based on the studentloans.gov website calculator - Since my s/o has loans himself, if we were married and filed jointly assuming a combined AGI of 170,000K , it says my monthly payment would be $750. The total amount forgiven under PSLF would be $83,000.

I've considered refinancing (If i decided against PSLF), but the lack of security makes me cautious. I like knowing that the federal loans give me options for income based repayments, etc if anything were to happen.

TIAX
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Re: Student loan debt, PSLF, planning for future

Post by TIAX » Sat May 06, 2017 12:57 pm

truepat76 wrote: Based on the studentloans.gov website calculator - Since my s/o has loans himself, if we were married and filed jointly assuming a combined AGI of 170,000K , it says my monthly payment would be $750. The total amount forgiven under PSLF would be $83,000.

I've considered refinancing (If i decided against PSLF), but the lack of security makes me cautious. I like knowing that the federal loans give me options for income based repayments, etc if anything were to happen.
It doesn't matter what amount would be forgiven since you have high rate loans and can refi into lower loans. The question is, how much would you pay under each scenario?

Is that a reasonable concern being a doctor? Is being unemployed as a doctor common?

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neurosphere
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Re: Student loan debt, PSLF, planning for future

Post by neurosphere » Sat May 06, 2017 2:33 pm

h82goslw wrote:I have a kid going into medical field and will have a fair amount of debt upon graduation, so we've talked about PSLF and I try to follow current events on this.
Here are my thoughts on what to if one is concerned that legislative risk will impact PSLF:

http://www.sotirioskeros.com/2017/01/21 ... ment-plan/
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes".

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neurosphere
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Re: Student loan debt, PSLF, planning for future

Post by neurosphere » Sat May 06, 2017 2:42 pm

truepat76 wrote:Hello everyone,
I was hoping to get some feedback on what people would do in my situation.
What's the weighted interest rate on your loans, and how much (if any) is subsidized vs unsub?
Same question for your potential spouse: what's the weighted interest rate and how much in sub vs unsub?

I'm thinking that REPAYE for each of you is the best bet. Because you'll have debt/income ratios in the same general ballpark, so that getting married and combining income/debt won't hurt much if at all as far as PSLF is concerned. But I need more numbers and I might be able to do some math for you.

Also, don't forget the interest subsidies which accompany REPAYE (and are independent of PSLF) which will lower your effective interest rate (and mitigate the effects of not paying off, and you may even come out ahead using the cash flow for 401k or Roth, etc).

NS
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes".

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truepat76
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Re: Student loan debt, PSLF, planning for future

Post by truepat76 » Sat May 06, 2017 3:15 pm

TIAX-
You raise valid points. I'm not an MD but am a healthcare provider and there are tons of job opportunities, so you're right it isn't realistic.

I guess my main concern is not being able to purchase a home and pay associated costs while paying $1,500+ a month on student loans (if I refinance for a shorter term it would be even higher). Am I wrong in thinking money would be tight?

PSLF seems too good to turn down considering I'm starting my career in a nonprofit hospital and the vast majority of my potential future jobs would qualify.

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neurosphere
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Re: Student loan debt, PSLF, planning for future

Post by neurosphere » Sat May 06, 2017 3:21 pm

truepat76 wrote: My concern is that once married and filing jointly, our combined AGI will be too high and it will basically make PSLF pointless?
Quick calculation, assuming you get married, that your loans average 5%, they are all unsubsidized, you each max out a 401k, you pay $5000 in health insurance premiums, and have no other significant sources of income, use REPAYE and end up getting PSLF:

Total AGI: $134,000
Total loan balance: $214,000
Monthly payments: $914
Interest Subsidy: $0
Total paid toward loans over 10 years: $110,000 (estimate, because you will start paying down the loan before spouse)
Total PSLF: Approx $210,000

Of course, if there is extra income or raises, the forgiveness will be less.
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truepat76
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Re: Student loan debt, PSLF, planning for future

Post by truepat76 » Sat May 06, 2017 3:43 pm

Neurosphere - thank you so much

Here's my loan info:
LOAN/INTEREST %/PRINCIPAL/INTEREST

DIRECT STAFFORD UNSUBSIDIZED (5.31%) $14,300 $430
DIRECT PLUS GRADUATE (6.84%) $20,500 $1,746
DIRECT STAFFORD UNSUBSIDIZE (5.84%) $20,500 $1,491
DIRECT STAFFORD UNSUBSIDIZED (6.21%) $20,500 $2,626
DIRECT PLUS GRADUATE (7.21%) $19,500 $2,900
DIRECT STAFFORD UNSUBSIDIZED (3.86%) $5,599 $487
DIRECT STAFFORD SUBSIDIZED (3.86%) $2,018 $11
DIRECT STAFFORD UNSUBSIDIZED (6.80%) $2,641 $364
DIRECT STAFFORD SUBSIDIZED (3.40%) $5,137 $24
DIRECT STAFFORD UNSUBSIDIZED (6.80%) $2,364 $362
DIRECT STAFFORD SUBSIDIZED (3.40%) $4,431 $21
DIRECT STAFFORD UNSUBSIDIZED (6.80%) $926 $142
DIRECT STAFFORD SUBSIDIZED (4.50%) $1,724 $11
Total DIRECT STAFFORD UNSUBSIDIZED $66,830 $5,902
Total DIRECT PLUS GRADUATE $40,000 $4,646
Total DIRECT STAFFORD SUBSIDIZED $13,310 $67
Total All Loans $120,140 $10,615

In terms of my s/o's loans - I forgot that his mother took out a Parent PLUS loan for him. Only some of the loans are in his name. She "estimates" she took out about $55K (but he's on the hook for paying it all back). We have to get on her to figure out the exact balance and info. I know this screws up PSLF for him completely.

Here's the info for loans in his name. Please keep in mind that he still has another $10,000 to take out to pay for his last semester of school this Fall.

DIRECT STAFFORD UNSUBSIDIZED (3.76%) $1,000 $4
DIRECT STAFFORD SUBSIDIZED (SULA ELIGIBLE) (3.76%) $1,250 $0
DIRECT STAFFORD UNSUBSIDIZED (3.76%) $1,000 $22
DIRECT STAFFORD SUBSIDIZED (SULA ELIGIBLE) (3.76%) $2,250 $0
DIRECT STAFFORD UNSUBSIDIZED (4.29%) $5,500 $338
DIRECT STAFFORD UNSUBSIDIZED (4.66%) $898 $85
DIRECT STAFFORD SUBSIDIZED (SULA ELIGIBLE) (4.66%) $852 $0
DIRECT STAFFORD UNSUBSIDIZED (4.66%) $1,102 $119
DIRECT STAFFORD SUBSIDIZED (SULA ELIGIBLE) (4.66%) $2,648 $0
Total DIRECT STAFFORD UNSUBSIDIZED $9,500 $568
Total DIRECT STAFFORD SUBSIDIZED (SULA ELIGIBLE) $7,000 $0
Total All Loans $16,500 $568

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knpstr
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Re: Student loan debt, PSLF, planning for future

Post by knpstr » Sat May 06, 2017 3:51 pm

JimmyD wrote:Just to add our situation to the mix, my wife has $235k in student loan debt and we are on year six of IBR / PSLF. Payments are currently $650 / month. The advice given re: maxing out the 403b and filing taxes separately is spot on.

FYI PSLF is written into your master promissory note and would take a literal act of Congress to amend. If it comes down to it, do not take any changes lying down. Personally, I'll be taking legal action if we are negatively impacted by any future changes.

Cannot wait to get this debt off the books.
I recall seeing a spot on our local news, perhaps a month or two ago now, how people who thought they were taking all the right steps in the PSLF program are being told that something or other can't be verified in the administrative paperwork and thus are being denied forgiveness.

I'll admit it is not something I pay attention to closely since I don't have any student loans, but I recall that there has been more than a few "unpleasant surprises" with the program already.
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neurosphere
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Re: Student loan debt, PSLF, planning for future

Post by neurosphere » Sat May 06, 2017 3:58 pm

knpstr wrote:
JimmyD wrote:Just to add our situation to the mix, my wife has $235k in student loan debt and we are on year six of IBR / PSLF. Payments are currently $650 / month. The advice given re: maxing out the 403b and filing taxes separately is spot on.

FYI PSLF is written into your master promissory note and would take a literal act of Congress to amend. If it comes down to it, do not take any changes lying down. Personally, I'll be taking legal action if we are negatively impacted by any future changes.

Cannot wait to get this debt off the books.
I recall seeing a spot on our local news, perhaps a month or two ago now, how people who thought they were taking all the right steps in the PSLF program are being told that something or other can't be verified in the administrative paperwork and thus are being denied forgiveness.

I'll admit it is not something I pay attention to closely since I don't have any student loans, but I recall that there has been more than a few "unpleasant surprises" with the program already.
Not defending the Dept of Ed on this, but the number of people affected were small. What hit the news was a lawsuit based on events that happened years ago when the gov changed (or clarified?) the definition of an eligible employer and eligible job. In a very crude summary, the gov said you can't work for an advocacy/lobbying group and qualify for PSLF even if your actual job involves "public education". If I recall, three of the plaintiffs worked for the American Bar Association? IANAL, but I believe that this would not affect those who work in healthcare for a 501c, or work in education where the employer is a state or local gov agency, or a private college/university/etc. But who know? I think the risk for most people in most jobs is small. I'm not concerned that the gov will retroactively revoke qualifying payments for medical residents working for a non-profit hospital, for example. I guess anything could happen though.
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neurosphere
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Re: Student loan debt, PSLF, planning for future

Post by neurosphere » Sat May 06, 2017 4:36 pm

truepat76 wrote: Here's my loan info:
LOAN/INTEREST %/PRINCIPAL/INTEREST
Excluding the parents PLUS loans, and eyeballing the sub/unsub ratio and the interest rates I came up with some new calcs below. I don't have time to calculate a true weighted ave, but I don't think it changes the conclusions.

Based on your spouse's (calling him that for brevity) potential income and debt, he will not qualify for any interest subsidy using REPAYE. Thus the outcomes for both PAYE and REPAYE are the same. But with PAYE you can file separately. If so...

IF he maxes out a 401k and files separately:
Payments are $150/month, and forgiveness about $20,000.

Now you also will not get a subsidy with REPAYE given your income, so no advantage to REPAYE. With PAYE:
Payments $580/month and forgiveness of about $70,000.

But if married and counting joint income:
Payments of $930, PSLF of about $90,000

So the total forgiveness is the same either way, but the total monthly payments are less if you each file separately and choose PAYE. You'll have to do the math, but I'll bet that filing separately will cost you more in extra taxes than you'll save in payments. Especially if kids enter the picture someday.

These are rough estimates. But assume maxing out two 401ks, and no future raises over 10 years, which is not likely to be true. Add any extra income, and forgiveness goes down. The nice things about federal loans is the insurance against job loss. If your income goes down or one of you stops work, your payments can go down immediately, which increases forgiveness (and obviously helps with cash flow).

Your initial concern was that using REPAYE when married would make your payments near the standard plan? I don't find that to be true. They would still be much less than the 10-year. So that extra money could be used to max 401k, max Roth.

Of course, each year you would re-evaluate and consider a refinance if lower rates are available. Or if there are legislative changes which alter the path.

Summary:

-- If things go as you predict with respect to salary, it doesn't matter much if you choose PAYE or REPAYE, because I don't anticipate you filing separately. So choose REPAYE for each of you, because this has the best benefit if things go worse than planned (prolonged layoff). If things go much BETTER than planned (e.g. spouse makes $300,000) then you may want to consider MJS, but at that point I would just pay off the loans. :D
-- Max out deductible employer accounts, to get the max benefit of PSLF (and ensure you don't SPEND the extra cash flow!)
-- Re-evaluate your options each year based on your specific situation and laws at the time. E.g. refinance to a student loan? Refinance to a private loan? Stay in REPAYE? Etc.

NS

P.S. I don't stand by the math because I didn't double-check my work. 8-)
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neurosphere
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Re: Student loan debt, PSLF, planning for future

Post by neurosphere » Fri May 12, 2017 2:33 pm

truepat76 wrote:Neurosphere - thank you so much
Hey truepat, I edited/modified the spreadsheet I used for my PSLF calculations and put it online. You can put in your own numbers and see if it adds any additional insight into your situation. You'll be able to see exactly how much your payments and other parameters changes with projected changes in future income, or with 401k contributions, etc.

It's here: Edit, new-link: https://www.doctoredmoney.org/student-d ... calculator

Let me know what you think.

NS
Last edited by neurosphere on Fri May 26, 2017 11:13 pm, edited 1 time in total.
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Dukethegator
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Re: Student loan debt, PSLF, planning for future

Post by Dukethegator » Sun May 21, 2017 5:39 am

neurosphere wrote:Not defending the Dept of Ed on this, but the number of people affected were small. What hit the news was a lawsuit based on events that happened years ago when the gov changed (or clarified?) the definition of an eligible employer and eligible job. In a very crude summary, the gov said you can't work for an advocacy/lobbying group and qualify for PSLF even if your actual job involves "public education". If I recall, three of the plaintiffs worked for the American Bar Association? IANAL, but I believe that this would not affect those who work in healthcare for a 501c, or work in education where the employer is a state or local gov agency, or a private college/university/etc. But who know? I think the risk for most people in most jobs is small. I'm not concerned that the gov will retroactively revoke qualifying payments for medical residents working for a non-profit hospital, for example. I guess anything could happen though.
More to the point, the College Cost Reduction and Access Act which created PSLF defines a public service job as:
20 U.S.C. § 1087e(m)(3)(b) wrote: a full-time job in emergency management, government, military service, public safety, law enforcement, public health, public education (including early childhood education), social work in a public child or family service agency, public interest law services (including prosecution or public defense or legal advocacy in low-income communities at a nonprofit organization), public child care, public service for individuals with disabilities, public service for the elderly, public library sciences, school-based library sciences and other school-based services, or at an organization that is described in section 501(c)(3) of the Internal Revenue Code of 1986 and exempt from taxation under section 501(a) of such Code;
The dispute with the ABA is over DOE reinterpreting "public interest law services" as it isn't defined by the Act. Medical practice groups don't face a similar risk because the Act expressly exempts 501(c)(3), such an agency change would require Congress to act.

Re: retroactive changes. The master promissory note (MPN) contains the essence of PSLF but during rule making DOE insisted the MPN created no contractual right and a the MPN says its terms can be modified by amendments to the Higher Education Act. In other words: it's an enormous mess. My guess: DOE could argue nobody has a right to PSLF until they meet the qualifying conditions, but that those terms can be changed and affect the applicant any time before he/she/it satisfies all the conditions. Eliminating PSLF requires the Congress to act, but there is nothing to stop Congress from eliminating it for everyone who hasn't hit 120 qualifying payments

One warning through -- and i'm not sure if its by statute or rule -- but the majority of the 120 payments for PSLF must be made on an income-driven repayment plan. So 60 of those payments must be made under IBR/PAYE/REPAYE or PSLF won't kick in. This isn't a problem for doctors who do residencies and then fellowships, but it is a problem for other health professionals who don't spend the first five years out making around $50,000.

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Re: Student loan debt, PSLF, planning for future

Post by neurosphere » Sun May 21, 2017 5:10 pm

Dukethegator wrote:One warning through -- and i'm not sure if its by statute or rule -- but the majority of the 120 payments for PSLF must be made on an income-driven repayment plan. So 60 of those payments must be made under IBR/PAYE/REPAYE or PSLF won't kick in. This isn't a problem for doctors who do residencies and then fellowships, but it is a problem for other health professionals who don't spend the first five years out making around $50,000.
You know, I hadn't really seen this put in this way. The PSLF guidelines as explained on the Dept of Ed PSLF page is quoted below. But I hadn't really thought of this as "at least 60 payments" on an income-driven plan. But I guess that's how one would interpret "majority" as below:
What is a qualifying repayment plan?

Qualifying repayment plans include all of the income-driven repayment plans (plans that base your monthly payment on your income) and the 10-year Standard Repayment Plan.

Even though the 10-year Standard Repayment Plan is a qualifying repayment plan for PSLF, you will not receive PSLF unless you make the majority of your 120 qualifying monthly payments under an income-driven repayment plan. If you are in repayment on the 10-year Standard Repayment Plan during the entire time you are working toward PSLF, you will have no remaining balance left to forgive after you have made 120 qualifying PSLF payments.
So it would seem that if someone was previously on the standard 10-year payment plan, but then learns about PSLF (or switches to an eligible employer) in year 6, then it would necessitate 5 more years of payments under an income-driven plan.

BUT, one doesn't need many years of low income to qualify for PSLF. Imagine one with $150,000 in student loans, does an internship of some sort for a year making $50,000, and then gets a job making $400,000. If he/she was on the PAYE plan the whole time, he/she would be eligible for PSLF in year 10. Although, the forgiveness would be small, since it would only be the "underpayments" in year 1 which would end up forgiven. Year 2-10 would be payments made at the standard 10-year amount.

NS

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Re: Student loan debt, PSLF, planning for future

Post by Dukethegator » Sun May 21, 2017 9:37 pm

neurosphere wrote:BUT, one doesn't need many years of low income to qualify for PSLF. Imagine one with $150,000 in student loans, does an internship of some sort for a year making $50,000, and then gets a job making $400,000. If he/she was on the PAYE plan the whole time, he/she would be eligible for PSLF in year 10. Although, the forgiveness would be small, since it would only be the "underpayments" in year 1 which would end up forgiven. Year 2-10 would be payments made at the standard 10-year amount.

NS
I think it depends on the debt level and AGI. If your IBR payment would be greater than your 10 year payment you are kicked off of IBR. I assume the same is true for PAYE. Assuming PSLF survives, everyone should be all about managing AGI.

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neurosphere
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Re: Student loan debt, PSLF, planning for future

Post by neurosphere » Mon May 22, 2017 2:54 am

Dukethegator wrote: I think it depends on the debt level and AGI. If your IBR payment would be greater than your 10 year payment you are kicked off of IBR. I assume the same is true for PAYE. Assuming PSLF survives, everyone should be all about managing AGI.
No. Under PAYE and IBR, if your payment would otherwise exceed the 10-year payment, your payment plan doesn't change. Instead. the rules simply cap the payment at the 10-year level, which becomes the "ceiling" under these two plans.. That is, you STAY on either PAYE or IBR, but your payments are the "same" as the 10-year standard payment plan. Officially, your payment plan remains PAYE or IBR.

With REPAYE, there is no cap, and your payments are always income-dependent, without a ceiling.

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truepat76
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Re: Student loan debt, PSLF, planning for future

Post by truepat76 » Sun Jun 11, 2017 4:40 am

Sorry I'm late to see this, I've been busy at work. Thank you for that spreadsheet - it is excellent! Also, interesting to look into the specific wording of PSLF and the MPN. October/November will be interesting and hopefully gives all current/soon to be forgiveness seekers more answers about whether it's realistic to pursue it or not

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Re: Student loan debt, PSLF, planning for future

Post by neurosphere » Sun Jun 11, 2017 8:54 am

truepat76 wrote:Sorry I'm late to see this, I've been busy at work. Thank you for that spreadsheet - it is excellent!
You are very welcome. It has taken me many dozens of hours to create it and refine it in the time since REPAYE was created. It's still not as user friendly as I would like. I'm always pleased to hear when someone finds it has helped them!

There are loan analysis firms out there which will gladly take $500 to $1000 of your money to do calculations which are even more basic/simplistic than what's in my "simple" PAYE v REPAYE calculator. And I suspect they make additional money from referral fees from loan refinance companies, so there is a bias towards suggesting refinancing vs sticking with PSLF.

In any case, please share the calculator with others you think may benefit (your graduate school classmates, whatever). I find that the financial aid offices at graduate/medical schools are poorly equipped to give comprehensive advice, even within the narrow definition of comprehensive student loan advice. So students and former students need to do their own homework of course. Although the site is "branded" for MDs, the loan advice/calculations applies to anyone with student loans.
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F150HD
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Re: Student loan debt, PSLF, planning for future

Post by F150HD » Sun Jun 11, 2017 9:28 am

$129,000 loans is a lot of debt but on $115,000 income it isn't insurmountable.

$400 a month rent for next 2 years.



Why not just buckle down and pay this off in 2 years while rent is so low. Then be done w/ it.

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neurosphere
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Re: Student loan debt, PSLF, planning for future

Post by neurosphere » Sun Jun 11, 2017 9:36 am

F150HD wrote:$129,000 loans is a lot of debt but on $115,000 income it isn't insurmountable.

$400 a month rent for next 2 years.


Why not just buckle down and pay this off in 2 years while rent is so low. Then be done w/ it.
Because then the OP is potentially giving up on $100,000+ of loan forgiveness. Consider it a job "perk". Why not take advantage of it?

Also, the SO has $85,000 of loans on a $45,000 salary (going up to a max of $65,000). Between the two of them, the total loans are not trivial with respect to their joint income. Could they pay off the loans aggressively if needed? I suppose so, but overall this will cost them much much more in total loan costs when compared to working towards loan forgiveness.
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F150HD
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Re: Student loan debt, PSLF, planning for future

Post by F150HD » Sun Jun 11, 2017 10:29 am

neurosphere wrote:
Because then the OP is potentially giving up on $100,000+ of loan forgiveness. Consider it a job "perk". Why not take advantage of it?

Also, the SO has $85,000 of loans on a $45,000 salary (going up to a max of $65,000). Between the two of them, the total loans are not trivial with respect to their joint income. Could they pay off the loans aggressively if needed? I suppose so, but overall this will cost them much much more in total loan costs when compared to working towards loan forgiveness.
PSLF - So the forgiven amount, where does the $$ come from to pay 'that' back? nothing is 'free'. Someone pays for it.

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neurosphere
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Re: Student loan debt, PSLF, planning for future

Post by neurosphere » Sun Jun 11, 2017 10:43 am

F150HD wrote: PSLF - So the forgiven amount, where does the $$ come from to pay 'that' back? nothing is 'free'. Someone pays for it.
It comes from the same place the scholarship which paid for my graduate training (in advance) came from. The federal government. :D

PSLF is a federal education program.
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes".

skeptastic
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Re: Student loan debt, PSLF, planning for future

Post by skeptastic » Sat Jul 28, 2018 2:09 am

neurosphere wrote:
Sat May 06, 2017 2:33 pm
h82goslw wrote:I have a kid going into medical field and will have a fair amount of debt upon graduation, so we've talked about PSLF and I try to follow current events on this.
Here are my thoughts on what to if one is concerned that legislative risk will impact PSLF:

http://www.sotirioskeros.com/2017/01/21 ... ment-plan/
I know that I am a year late posting in this thread, but this was a great link and I wanted to than you for it. Such a wise way to proceed if one wants to hedge their bets on PSLF versus paying the loans off in full. I've been lurking for years and finally decided to join to thank you for sharing this. Also, thank you all for your sage wisdom throughout the past few years. I am miles behind most on this board but am making progress and am appreciative for the forum's role in this.

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Re: Student loan debt, PSLF, planning for future

Post by Nissanzx1 » Sat Jul 28, 2018 5:34 am

Don't cry, but DO feel the full gravity of the situation. Everything will work out, but a couple pieces of advice from a 40 year old whose make plenty of mistakes. The fact that you are asking these questions, tells me you have what it takes to do this.

SLF is not predictable, certainly not something you should "count on." Punch these in the face hard every month to the tune of thousands.

Keep a budget every month before the month begins. Make a debt payment goal for the next 12 month periods and divide by 12. Make it attainable but aggressive. Ours was $2300/mo on $60Kof wife's law loans.

Absolutely forget about home ownership until after marriage and after these loans are paid out. I purchased a house with a partner and let's just say, it didn't end well. It was awful! I felt like 2 inches tall dealing with lenders begging for a mortgage assumption..... had to borrow closing costs from my parents- borrower is truly slave to the lender (they weren't impressed). Wait until your home needs a $5000 repair while you have loan repayment goals- not fun and injects too much risk to your life.

I would personally stop investing or only do the smallest amount you can. You need the money for debt right now, especially with your interest rates. Keep us updated, roll up your sleeves, you got this...

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