Public Service Loan Forgiveness - Non Profit employees

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Mtangler25
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Public Service Loan Forgiveness - Non Profit employees

Post by Mtangler25 » Fri Oct 04, 2019 11:15 am

Hello,

I really need some advice regarding student loan "forgiveness"

My wife just graduated with her second degree, she is a Nurse and got a job at our local hospital which is a non-profit. Before she graduated she had to meet with a financial coach on campus. This gentleman spoke to her about the Public Service Loan Forgiveness Program (PSLF) and I am very perplexed by this.

So here is out financial situation:

Married Filling Jointly

State: MT

Combined Income: $108,000 (pre tax)

Federal Tax Bracket: 22%

State Tax Bracket: 6.9%

His debt: 0

Her debt: $50,000 (our debt)


The financial coach told her about this program and essentially it forgives your student loans if you work in the non-profit sector for 10-years, you must make 120 monthly payments based on income. Even the interest is paid off. To me it sounded too good to be true, and after doing some research it actually is a legit program. However, I am not in favor of this program for several reasons.

#1) I (we) are Dave Ramsey followers (not for investing) I believe that we should attack this pile of debt and get it paid of VERY quickly. We have two well paying stable jobs, we have no children and no mortgage. We could easily pay off this debt in 2-3 years. Maybe even 1 year if we REALLY lived as minimalists (we are not extravagant spending people by any means).

#2) The debt goes against our credit, so when it comes time to buy a home that debt counts against us. I don't like that because a home is our most expensive purchase and I want to get the best rate possible!

#3) The debt would just be sitting there, getting bigger and bigger.

#4) This is not a political statement in any form, but I don't want to rely on the federal government to take care of our personal finances. One of my wife's objections to the Financial Coach is that the legislation could change and then we would be left high and dry, his response was that would be unlikely and it hasn't happened yet. (YET!!)

My wife told the coach that I would definitely be against it, and his response to that was we could save what we would be paying in a savings account and if something goes wrong just pay it off (including interest)

I would like to disclose that my wife and I are like minded when it comes to personal finances, but she is a lot more open to this program than I. I am not posting this to prove her wrong or me right, I want to get some feedback from the forum as I do with my of my personal finances/investments.

Does anyone have experience with this program? Thoughts?

Jack FFR1846
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Re: Public Service Loan Forgiveness - Non Profit employees

Post by Jack FFR1846 » Fri Oct 04, 2019 11:18 am

In light of the low percentage of successful forgiveness applications, if this were me, I'd pay them off as quickly as possible. Student loans tend to have horrible interest rates.
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Topic Author
Mtangler25
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Re: Public Service Loan Forgiveness - Non Profit employees

Post by Mtangler25 » Fri Oct 04, 2019 11:22 am

Jack FFR1846 wrote:
Fri Oct 04, 2019 11:18 am
In light of the low percentage of successful forgiveness applications, if this were me, I'd pay them off as quickly as possible. Student loans tend to have horrible interest rates.
Are your referring to the low percentage of successful forgiveness applications for THIS program in particular? Or just a general statement?

Prettyfrtnt
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Re: Public Service Loan Forgiveness - Non Profit employees

Post by Prettyfrtnt » Fri Oct 04, 2019 11:39 am

I tried to do this with my debt. The issue is you need 10 years of income qualified payments. If you look at what that amount is... you will easily pay off your loans first. In my experience on 100k debt you can pay really small payments like $400 a month. But these don’t qualify. You’ll find the qualifying payments will be like $1200 a month. You’ll notice you might be able to forgive the remaining very small amount. All the while paying their interest costs. The program kinda stinks. It rewards people for getting loans and degrees that were bad: put them in a position to make little and not be able to pay them off.

Jack FFR1846
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Re: Public Service Loan Forgiveness - Non Profit employees

Post by Jack FFR1846 » Fri Oct 04, 2019 11:49 am

Mtangler25 wrote:
Fri Oct 04, 2019 11:22 am
Jack FFR1846 wrote:
Fri Oct 04, 2019 11:18 am
In light of the low percentage of successful forgiveness applications, if this were me, I'd pay them off as quickly as possible. Student loans tend to have horrible interest rates.
Are your referring to the low percentage of successful forgiveness applications for THIS program in particular? Or just a general statement?
General statement based on news stories that have plastered the outlets. I thought PSLF was what they were all talking about, however.
Bogle: Smart Beta is stupid

Topic Author
Mtangler25
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Re: Public Service Loan Forgiveness - Non Profit employees

Post by Mtangler25 » Fri Oct 04, 2019 11:51 am

Jack FFR1846 wrote:
Fri Oct 04, 2019 11:49 am
Mtangler25 wrote:
Fri Oct 04, 2019 11:22 am
Jack FFR1846 wrote:
Fri Oct 04, 2019 11:18 am
In light of the low percentage of successful forgiveness applications, if this were me, I'd pay them off as quickly as possible. Student loans tend to have horrible interest rates.
Are your referring to the low percentage of successful forgiveness applications for THIS program in particular? Or just a general statement?
General statement based on news stories that have plastered the outlets. I thought PSLF was what they were all talking about, however.
They could have been, just thought I would ask. Thank you!

fposte
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Re: Public Service Loan Forgiveness - Non Profit employees

Post by fposte » Fri Oct 04, 2019 11:54 am

Mtangler25 wrote:
Fri Oct 04, 2019 11:22 am
Jack FFR1846 wrote:
Fri Oct 04, 2019 11:18 am
In light of the low percentage of successful forgiveness applications, if this were me, I'd pay them off as quickly as possible. Student loans tend to have horrible interest rates.
Are your referring to the low percentage of successful forgiveness applications for THIS program in particular? Or just a general statement?
Under 1% of applications for PSLF have been approved. It has proven to be a very unforgiving program in terms of hoops required.

campy2010
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Re: Public Service Loan Forgiveness - Non Profit employees

Post by campy2010 » Fri Oct 04, 2019 11:59 am

The PSLF program uses 10% of adjusted gross income (AGI) to determine the monthly payment. I ran the numbers on finaid.org assuming a 6.8% interest rate and your 10-year monthly payment would need to be less than $575.40/month ($6900/year) to benefit from this program. This would correspond to a $69,000 AGI. If your AGI is any higher than $69,000/year the loan will be paid in full before the 10-year mark.

There is an option to file married filed separately and wife can base the 10% payments on her AGI alone. One could imagine using 401k contributions to further decrease her AGI. Doing all of this decreases the 10% payment due each year leaving more to be forgiven at the end of 10 years. One would have to do the math on your income splits to determine how much would be left to be forgiven at year 10. My guess is not a lot would be remaining.

Other considerations would be whether wife will stay in nursing or at non-profits. Will she want to take time off or go part-time at some point to raise children. Exercising these options become harder if the PSLF program hangs in the balance.

As of right now, the PSLF program is starting to forgive loans so I consider it to be a legitimate program worth pursuing if the numbers make sense. Follow the rules to the T and submit the paperwork on schedule. Like I said, the benefit that you'll see is probably small. It may or may not be worth the effort and the impact on life and career planning.

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Re: Public Service Loan Forgiveness - Non Profit employees

Post by simplesimon » Fri Oct 04, 2019 12:04 pm

campy2010 wrote:
Fri Oct 04, 2019 11:59 am
The PSLF program uses 10% of adjusted gross income (AGI) to determine the monthly payment. I ran the numbers on finaid.org assuming a 6.8% interest rate and your 10-year monthly payment would need to be less than $575.40/month ($6900/year) to benefit from this program. This would correspond to a $69,000 AGI. If your AGI is any higher than $69,000/year the loan will be paid in full before the 10-year mark.

There is an option to file married filed separately and wife can base the 10% payments on her AGI alone. One could imagine using 401k contributions to further decrease her AGI. Doing all of this decreases the 10% payment due each year leaving more to be forgiven at the end of 10 years. One would have to do the math on your income splits to determine how much would be left to be forgiven at year 10. My guess is not a lot would be remaining.

Other considerations would be whether wife will stay in nursing or at non-profits. Will she want to take time off or go part-time at some point to raise children. Exercising these options become harder if the PSLF program hangs in the balance.

As of right now, the PSLF program is starting to forgive loans so I consider it to be a legitimate program worth pursuing if the numbers make sense. Follow the rules to the T and submit the paperwork on schedule. Like I said, the benefit that you'll see is probably small. It may or may not be worth the effort and the impact on life and career planning.
Hopefully the Finance Coach can do this math. Otherwise why is he there?

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Re: Public Service Loan Forgiveness - Non Profit employees

Post by cheese_breath » Fri Oct 04, 2019 12:05 pm

The 1990's TV series Northern Exposure was based on something like this. New doctor Joel Fleishman (Rob Morrow) is assigned to a small town in Alaska to serve as the town doctor in order to work off his debt.
The surest way to know the future is when it becomes the past.

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Re: Public Service Loan Forgiveness - Non Profit employees

Post by Naris » Fri Oct 04, 2019 12:07 pm

I wouldn't be scared by the high rejection rates for the first batch of people who applied for PSLF. The various news articles about 99% of applications being rejected is, in large measure, because many, many people applied who were clearly not eligible for PSLF (e.g. they had had their loans for less than ten years, had private rather than federal loans, etc.).

Leaving aside whether PSLF is a good program from a policy perspective, it is an incredibly powerful financial program and can be well worth understanding. That said, in your situation, I think your initial reaction of simply paying off the loans ASAP (and presumably refinancing them to obtain a lower rate in the interim) is quite reasonable. Your combined debt load is 0.5x your annual income, so that's very doable.

That said, if you were interested in it, PSLF could provide some financial benefits. Let's look at the best case scenario. Note that the repayments under the various income-driven repayment plans are keyed to AGI, so minimizing your AGI is the goal if you went down the PSLF route.

Gross income: $108,000
His Traditional IRA contribution: $6,000
Her Traditional IRA contribution: $6,000
His Traditional 401(k) contribution: $19,000
Her Traditional 403(b) contribution: $19,000
(Can you contribute to an HSA? If so, add another $7,000 deduction from AGI, assuming you could cash flow it.)

Total deductions: $50,000
AGI: $58,000

Now let's say you use Pay-As-You-Earn (PAYE).

Family size: 2 (?)
2019 Federal Poverty Line (2 people): $16,910
150% of FPL: $25,365

"Discretionary income": $32,635
Annual PAYE payments: 3,264
(10% of your "discretionary income," which is your AGI above 150% of the Federal Poverty Level for your household size.)

Ignoring wage growth, after ten years you would have paid an amount equal to approximately 65% of the initial principal (and none of the interest), at which point the entire amount would be forgiven. This is obviously cheaper than paying off the entire principal and interest, even if the interest is extremely minimal because you paid it off quickly.

There are various calculators available on the internet that you can use as well. The numbers above are meant to provide a rough estimate only.

On the other hand, you run a number of risks if you attempt to obtain PSLF, including:
1. Will your wages increase significantly? If so, your payments may rise enough to destroy any advantage.
2. Will your wife want to work at non-profit employers for at least the next ten years? It would be very expensive if she wanted to switch to a for-profit employer or drop out of the workforce in, say, eight years. This may be less of a concern given the prevalence of non-profits in the medical field.
3. Execution risk -- there are a fair number of steps that you have to make sure you do correctly in order to obtain PSLF, and messing them up could cost you.
4. Psychological discomfort from holding the debt (especially given the execution risk).

Of course, my numbers above also assume that you're able to put nearly half of your gross income into tax-advantaged savings vehicles (thereby minimizing your AGI and correspondingly your income-driven repayments). To the extent you put less into such tax-advantaged accounts, your AGI will rise and so will your payments.

Finally, I wouldn't worry too much about the impact on buying a house. Your wife's credit score should not be overly impacted by having the debt so long as she is paying it on time. Additionally, many lenders will now calculate your debt-to-income ratio based on the income driven repayments (rather than imputing it from the total debt load). Many people are using these programs, and lenders are motivated to and have found ways of accommodating this not unusual situation.

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Re: Public Service Loan Forgiveness - Non Profit employees

Post by peseta » Fri Oct 04, 2019 12:58 pm

As campy points out above, if your income is too high, your payment will be set so high in the program that your loans would get paid off before the 10-year mark. Assuming this isn't the case, one strategy that I've heard the White Coat Investor and others suggest is to first figure out how much you'd have to pay per month to pay off the loans in full in 10 years. Then, pay the minimum required payment on the loans and bank the difference in a relatively safe investment (e.g., Treasuries). After ten years, if your wife qualifies for PSLF, great, the debt is gone. If not, you liquidate the account. Either way, the loan is paid off after 10 years.

I'll word this in a way that does not directly speculate on future legislation, etc . . . at present, the burden to the Treasury from these programs is minuscule. That will change as time goes on (especially if the blanket forgiveness programs proposed by some presidential candidates are enacted). I suspect there may be much more public blowback in the future from what is effectively the subsidization of the future middle-upper/upper classes.

I don't intend for this observation to be political, but practical -- if it were me, I wouldn't bank on the program being there, at least in current form, in a decade. Ten years is a long time. Hedging one's bets seems prudent to me.

peseta

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Re: Public Service Loan Forgiveness - Non Profit employees

Post by junior » Fri Oct 04, 2019 1:07 pm

peseta wrote:
Fri Oct 04, 2019 12:58 pm
As campy points out above, if your income is too high, your payment will be set so high in the program that your loans would get paid off before the 10-year mark.
This is not true under the income based repayment plan. If you income is too high you will be billed under the standard 10 year payment plan rate. You won't be billed more than what you would be under the 10 year plan.

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Re: Public Service Loan Forgiveness - Non Profit employees

Post by peseta » Fri Oct 04, 2019 1:13 pm

junior wrote:
Fri Oct 04, 2019 1:07 pm
peseta wrote:
Fri Oct 04, 2019 12:58 pm
As campy points out above, if your income is too high, your payment will be set so high in the program that your loans would get paid off before the 10-year mark.
This is not true under the income based repayment plan. If you income is too high you will be billed under the standard 10 year payment plan rate. You won't be billed more than what you would be under the 10 year plan.
Thanks for the catch, and sorry for imprecise wording -- I meant it would get paid off *at* the 10 year mark, not before (my bad). That is correct, right? My gist was that PSLF was not even available in this scenario.

peseta

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Re: Public Service Loan Forgiveness - Non Profit employees

Post by mariezzz » Fri Oct 04, 2019 1:19 pm

A google search for public service loan forgiveness and some time researching will likely answer almost all your questions - it doesn't sound like you've done that.

Start here - make sure the loans qualify and employment qualifies.
https://studentaid.ed.gov/sa/repay-loan ... ic-service

In the past, the available online information was minimal and at times wrong or contradictory, but that has improved. It's important to be well-informed, and be ready to challenge incorrect decisions and answers that are given all too frequently by customer service agents of services of qualifying loans. It's not unusual for them to incorrectly calculate your loan payment - they'll often calculate it to be too high if you've made pre-tax payroll contributions.
Last edited by mariezzz on Fri Oct 04, 2019 1:23 pm, edited 1 time in total.

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Re: Public Service Loan Forgiveness - Non Profit employees

Post by junior » Fri Oct 04, 2019 1:21 pm

peseta wrote:
Fri Oct 04, 2019 1:13 pm
junior wrote:
Fri Oct 04, 2019 1:07 pm
peseta wrote:
Fri Oct 04, 2019 12:58 pm
As campy points out above, if your income is too high, your payment will be set so high in the program that your loans would get paid off before the 10-year mark.
This is not true under the income based repayment plan. If you income is too high you will be billed under the standard 10 year payment plan rate. You won't be billed more than what you would be under the 10 year plan.
Thanks for the catch, and sorry for imprecise wording -- I meant it would get paid off *at* the 10 year mark, not before (my bad). That is correct, right? My gist was that PSLF was not even available in this scenario.

peseta
It's not available if you make 120 payments under the 10 year payment plan because the loan will be paid off. But if you make say, 60 payments under income based repayment, then get a raise and find yourself no longer eligible for income based repayment because you make too much, you still will be eligible for loan forgiveness after 60 income based repayments and 60 10 year plan repayments since some of the principle will not have been paid off at the time of 120 qualifying payments.

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Re: Public Service Loan Forgiveness - Non Profit employees

Post by mariezzz » Fri Oct 04, 2019 1:25 pm

junior wrote:
Fri Oct 04, 2019 1:21 pm
peseta wrote:
Fri Oct 04, 2019 1:13 pm
junior wrote:
Fri Oct 04, 2019 1:07 pm
peseta wrote:
Fri Oct 04, 2019 12:58 pm
As campy points out above, if your income is too high, your payment will be set so high in the program that your loans would get paid off before the 10-year mark.
This is not true under the income based repayment plan. If you income is too high you will be billed under the standard 10 year payment plan rate. You won't be billed more than what you would be under the 10 year plan.
Thanks for the catch, and sorry for imprecise wording -- I meant it would get paid off *at* the 10 year mark, not before (my bad). That is correct, right? My gist was that PSLF was not even available in this scenario.

peseta
It's not available if you make 120 payments under the 10 year payment plan because the loan will be paid off. But if you make say, 60 payments under income based repayment, then get a raise and find yourself no longer eligible for income based repayment because you make too much, you still will be eligible for loan forgiveness after 60 income based repayments and 60 10 year plan repayments since some of the principle will not have been paid off at the time of 120 qualifying payments.
Depending on the payment plan, monthly payment CAN exceed the standard payment plan. See
https://studentaid.ed.gov/sa/repay-loan ... ome-driven
This is true for REPAYE, where the monthly payment is 'Generally 10 percent of your discretionary income.'
Under the REPAYE and ICR Plans, your payment is always based on your income and family size, regardless of any changes in your income. This means that if your income increases over time, in some cases your payment may be higher than the amount you would have to pay under the 10-year Standard Repayment Plan.
The confusion here shows how important it is to do one's own research and thoroughly understand one's own situation.

The acronyms of the various repayment plans get confusing and are often used incorrectly online, so be careful there. IDR (Income driven repayment) refers to numerous plans, which include PAYE, REPAYE, ICR, IBR. As you can see, in particular, IDR, ICR, IBR are easily confused - but they are different plans. There are other loan payment options (https://studentaid.ed.gov/sa/repay-loan ... tand/plans ) that do not qualify for PSLF.

Congress has given more attention to the problems that have become apparent, especially since late 2017 (the earliest anyone could request forgiveness). However, it's unlikely these are going to get resolved any time soon, given the deadlock in congress. NY just files suit against FedLoan, so it's getting attention at the state level, to a degree.
The PSLF Program forgives the remaining balance on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.
Be sure you understand what direct loans are - and whether your loans qualify.
Certain government loans can be consolidated with direct loans, but you need to pay attention and be sure that consolidation loan will be eligible for PSLF. Additionally, if you're going to consolidate, do it ASAP:

https://studentaid.ed.gov/sa/repay-loan ... ible-loans
You may have received loans under other federal student loan programs, such as the Federal Family Education Loan (FFEL) Program or the Federal Perkins Loan (Perkins Loan) Program. Loans from these programs do not qualify for PSLF, but they may become eligible if you consolidate them into a Direct Consolidation Loan. However, only qualifying payments that you make on the new Direct Consolidation Loan can be counted toward the 120 payments required for PSLF. Any payments you made on the FFEL Program loans or Perkins Loans before you consolidated them don’t count.

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Re: Public Service Loan Forgiveness - Non Profit employees

Post by mariezzz » Fri Oct 04, 2019 1:48 pm

campy2010 wrote:
Fri Oct 04, 2019 11:59 am
The PSLF program uses 10% of adjusted gross income (AGI) to determine the monthly payment.
This isn't an accurate statement at all. The monthly payment depends on the specific of the qualifying (for PSLF) income driven payment plan you are on.

'Discretionary income' as used by the repayment plans is not the same as AGI, and the percentage of one's 'discretionary income' that one is required to pay monthly depends on the repayment plan.
Last edited by mariezzz on Fri Oct 04, 2019 1:49 pm, edited 1 time in total.

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Re: Public Service Loan Forgiveness - Non Profit employees

Post by Nate79 » Fri Oct 04, 2019 1:49 pm

I certainly would not wish on my worst enemy to live their life for a decade under such a program that limits your future. Instead pay off the debt asap. As a nurse her financial future is unlimited unless she lives under the servitude of the PSLF.

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Re: Public Service Loan Forgiveness - Non Profit employees

Post by Renzi » Fri Oct 04, 2019 2:34 pm

Mtangler25 wrote:
Fri Oct 04, 2019 11:15 am
#1) I (we) are Dave Ramsey followers (not for investing) I believe that we should attack this pile of debt and get it paid of VERY quickly. We have two well paying stable jobs, we have no children and no mortgage. We could easily pay off this debt in 2-3 years. Maybe even 1 year if we REALLY lived as minimalists (we are not extravagant spending people by any means).
Federal loans are not "debt" in the traditional sense. When you are on these repayment plans your monthly payment adjusts with your income so you consistently pay 10%. You shouldn't ever be at risk of default because your payments are capped at 10%, and if your income goes down (even to 0) your payments will be adjusted accordingly. You should focus on the total payoff amount.
Mtangler25 wrote:
Fri Oct 04, 2019 11:15 am
#2) The debt goes against our credit, so when it comes time to buy a home that debt counts against us. I don't like that because a home is our most expensive purchase and I want to get the best rate possible!
It doesn't really. Your required monthly payment (10% of your income) is calculated against your monthly income. I just bought a home with 10% down and six figures of student loans. In fact, having that sort of debt and consistent repayments helped my credit profile, and I got very close to the base rate (and the slight increase was not due to DTI ratio).
Mtangler25 wrote:
Fri Oct 04, 2019 11:15 am
#3) The debt would just be sitting there, getting bigger and bigger.
It would not. In fact, you would be better off if this were the case. As your AGI stands now your monthly payment would probably be high enough to repay the loan in 10 years or less, so nothing would be forgiven and you would have paid the inflated federal rate for almost 10 years (I believe a poster above ran the numbers already). You can reduce your AGI in a number of ways, but the biggest risk here is actually that your income increases over the course of 10 years to the point where there isn't much, if anything, to be forgiven.
Mtangler25 wrote:
Fri Oct 04, 2019 11:15 am
#4) This is not a political statement in any form, but I don't want to rely on the federal government to take care of our personal finances. One of my wife's objections to the Financial Coach is that the legislation could change and then we would be left high and dry, his response was that would be unlikely and it hasn't happened yet. (YET!!)
They will not remove the program once you have started paying in, it's in the note. They may cut it off for future graduates, but millions of people have built their lives around forgiveness of this sort, taking it away would be like taking social security. You also need to consider, federal rates are not fixed either. They can change as well I suspect if the democrats win there will be an opportunity to refinance federally at a much lower rate as well. I think the biggest political risk to not getting paid is actually an income cap. They won't ever be politically able to cut from those who need it, but if you have assets and a six figure income, I could easily see them saying no forgiveness after the fact.
Mtangler25 wrote:
Fri Oct 04, 2019 11:15 am
My wife told the coach that I would definitely be against it, and his response to that was we could save what we would be paying in a savings account and if something goes wrong just pay it off (including interest)
I don't think this makes sense. You are just losing the spread here, which is about 5% between your rates and a high-yield savings account. I don't think this justifies the possible savings (which to be clear, would not be 50k - it would be whatever is left on 50k after making 10 years of minimum payments of 10% of AGI).[/quote]
Does anyone have experience with this program? Thoughts?
You should just pay them off. There is a chance if you play your cards right you could get a good portion of the loan forgiven, but it would be complex and would rely on you making limited income gains (and your wife having limited career options) for the next 10 years. If you know you will have the cash flow to make payments, I think you should refinance now while rates are low. You can refinance at sofi now for 2.20% 5 year variable, which is 0.3% above what you earn in a Sofi savings account (and the variable rate and savings rate should move in tandem). If you do want to save instead of paying down, your spread is now 0.3% instead of 5%. You also have much more flexibility - at 6.9% its hard to justify using your cash for anything but repayments, but at 2.2%, you have the flexibility to look into other options.

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Re: Public Service Loan Forgiveness - Non Profit employees

Post by JimmyD » Fri Oct 04, 2019 2:48 pm

I'm on track to get my wife's $235K (you read that correctly) loans forgiven tax-free in three more years under PSLF. I've made it my part time job to completely understand every nuance of the program over the years.

That said, there's some advice given in this thread (and in sensationalist articles on Forbes) that I would encourage you to disregard, or at least, take with a grain of salt.

My advice is to pursue the program if you can employ tactics to lower the AGI as much as possible, e.g. max the 401k, file taxes separately, etc. Then, do the calculations to understand what the payment would be under the income-based repayment plan and extrapolate that out over ten years. It won't be exact due to raises, inflation, etc, but it will be close enough to give you an idea how that route compares to paying it off in full. There are obviously a lot of factors to consider (you'll probably take a tax hit for filing separately) and it'll be situational as to where or not it makes sense in your individual case, but I would certainly encourage you to run the numbers as opposed to just blindly repaying the balance.

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Mtangler25
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Re: Public Service Loan Forgiveness - Non Profit employees

Post by Mtangler25 » Fri Oct 04, 2019 3:59 pm

campy2010 wrote:
Fri Oct 04, 2019 11:59 am
The PSLF program uses 10% of adjusted gross income (AGI) to determine the monthly payment. I ran the numbers on finaid.org assuming a 6.8% interest rate and your 10-year monthly payment would need to be less than $575.40/month ($6900/year) to benefit from this program. This would correspond to a $69,000 AGI. If your AGI is any higher than $69,000/year the loan will be paid in full before the 10-year mark.

There is an option to file married filed separately and wife can base the 10% payments on her AGI alone. One could imagine using 401k contributions to further decrease her AGI. Doing all of this decreases the 10% payment due each year leaving more to be forgiven at the end of 10 years. One would have to do the math on your income splits to determine how much would be left to be forgiven at year 10. My guess is not a lot would be remaining.

Other considerations would be whether wife will stay in nursing or at non-profits. Will she want to take time off or go part-time at some point to raise children. Exercising these options become harder if the PSLF program hangs in the balance.

As of right now, the PSLF program is starting to forgive loans so I consider it to be a legitimate program worth pursuing if the numbers make sense. Follow the rules to the T and submit the paperwork on schedule. Like I said, the benefit that you'll see is probably small. It may or may not be worth the effort and the impact on life and career planning.

We are going to be filing jointly, just thought I would mention that. You made a good point about her taxing time off for children etc... Yes, out plan is to start a family in around 5 years, which would obviously change things. She would like to still work a part-time/casual call job while we are raising children.

I like the numbers you crunched, although they are not concrete, which is fine. As I stated we are Dave Ramsey people so we would be paying much more than the minimum payment. I am talking about putting like $2,000/month into paying off loans, we could pay it off in 2-3 years easily.

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Mtangler25
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Re: Public Service Loan Forgiveness - Non Profit employees

Post by Mtangler25 » Fri Oct 04, 2019 4:03 pm

JimmyD wrote:
Fri Oct 04, 2019 2:48 pm
I'm on track to get my wife's $235K (you read that correctly) loans forgiven tax-free in three more years under PSLF. I've made it my part time job to completely understand every nuance of the program over the years.

That said, there's some advice given in this thread (and in sensationalist articles on Forbes) that I would encourage you to disregard, or at least, take with a grain of salt.

My advice is to pursue the program if you can employ tactics to lower the AGI as much as possible, e.g. max the 401k, file taxes separately, etc. Then, do the calculations to understand what the payment would be under the income-based repayment plan and extrapolate that out over ten years. It won't be exact due to raises, inflation, etc, but it will be close enough to give you an idea how that route compares to paying it off in full. There are obviously a lot of factors to consider (you'll probably take a tax hit for filing separately) and it'll be situational as to where or not it makes sense in your individual case, but I would certainly encourage you to run the numbers as opposed to just blindly repaying the balance.
Wow, that's a lot of debt! I appreciate your point of view, but the way I see it is regardless of filing status and no matter how low we get that payment down to. We still are $50K in debt, and my perception is to live frugally, file jointly, halt investing temporarily. And throw an astronomical amount of money at the debt each month, like $2,000/month range. The debt will be paid off quickly.

But I get where you are coming from, I just see debt as a burden and a burden that I don't want to deal with for 10 years (besides a mortgage)

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Re: Public Service Loan Forgiveness - Non Profit employees

Post by Mtangler25 » Fri Oct 04, 2019 4:08 pm

Nate79 wrote:
Fri Oct 04, 2019 1:49 pm
I certainly would not wish on my worst enemy to live their life for a decade under such a program that limits your future. Instead pay off the debt asap. As a nurse her financial future is unlimited unless she lives under the servitude of the PSLF.
It kills me to say this to a Chiefs fan, but I agree with you. My favorite post of the thread by far! :sharebeer

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Re: Public Service Loan Forgiveness - Non Profit employees

Post by JimmyD » Fri Oct 04, 2019 4:58 pm

Mtangler25 wrote:
Fri Oct 04, 2019 4:03 pm
JimmyD wrote:
Fri Oct 04, 2019 2:48 pm
I'm on track to get my wife's $235K (you read that correctly) loans forgiven tax-free in three more years under PSLF. I've made it my part time job to completely understand every nuance of the program over the years.

That said, there's some advice given in this thread (and in sensationalist articles on Forbes) that I would encourage you to disregard, or at least, take with a grain of salt.

My advice is to pursue the program if you can employ tactics to lower the AGI as much as possible, e.g. max the 401k, file taxes separately, etc. Then, do the calculations to understand what the payment would be under the income-based repayment plan and extrapolate that out over ten years. It won't be exact due to raises, inflation, etc, but it will be close enough to give you an idea how that route compares to paying it off in full. There are obviously a lot of factors to consider (you'll probably take a tax hit for filing separately) and it'll be situational as to where or not it makes sense in your individual case, but I would certainly encourage you to run the numbers as opposed to just blindly repaying the balance.
Wow, that's a lot of debt! I appreciate your point of view, but the way I see it is regardless of filing status and no matter how low we get that payment down to. We still are $50K in debt, and my perception is to live frugally, file jointly, halt investing temporarily. And throw an astronomical amount of money at the debt each month, like $2,000/month range. The debt will be paid off quickly.

But I get where you are coming from, I just see debt as a burden and a burden that I don't want to deal with for 10 years (besides a mortgage)

Definitely a TON of debt. I literally almost fell out of my chair when I did her taxes for the first time back when we were dating.

As a former Dave Ramsey discipile myself, I totally get and respect your point of view. If we were dealing with a smaller debt burden, I'd most likely bite the bullet and pay it all off as well, but in our case, it makes more financial sense to maximize all of our tax-advantaged investments and just pay the bare minimum on the loan.

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Re: Public Service Loan Forgiveness - Non Profit employees

Post by Mtangler25 » Fri Oct 04, 2019 5:30 pm

JimmyD wrote:
Fri Oct 04, 2019 4:58 pm
Mtangler25 wrote:
Fri Oct 04, 2019 4:03 pm
JimmyD wrote:
Fri Oct 04, 2019 2:48 pm
I'm on track to get my wife's $235K (you read that correctly) loans forgiven tax-free in three more years under PSLF. I've made it my part time job to completely understand every nuance of the program over the years.

That said, there's some advice given in this thread (and in sensationalist articles on Forbes) that I would encourage you to disregard, or at least, take with a grain of salt.

My advice is to pursue the program if you can employ tactics to lower the AGI as much as possible, e.g. max the 401k, file taxes separately, etc. Then, do the calculations to understand what the payment would be under the income-based repayment plan and extrapolate that out over ten years. It won't be exact due to raises, inflation, etc, but it will be close enough to give you an idea how that route compares to paying it off in full. There are obviously a lot of factors to consider (you'll probably take a tax hit for filing separately) and it'll be situational as to where or not it makes sense in your individual case, but I would certainly encourage you to run the numbers as opposed to just blindly repaying the balance.
Wow, that's a lot of debt! I appreciate your point of view, but the way I see it is regardless of filing status and no matter how low we get that payment down to. We still are $50K in debt, and my perception is to live frugally, file jointly, halt investing temporarily. And throw an astronomical amount of money at the debt each month, like $2,000/month range. The debt will be paid off quickly.

But I get where you are coming from, I just see debt as a burden and a burden that I don't want to deal with for 10 years (besides a mortgage)

Definitely a TON of debt. I literally almost fell out of my chair when I did her taxes for the first time back when we were dating.

As a former Dave Ramsey discipile myself, I totally get and respect your point of view. If we were dealing with a smaller debt burden, I'd most likely bite the bullet and pay it all off as well, but in our case, it makes more financial sense to maximize all of our tax-advantaged investments and just pay the bare minimum on the loan.
May I ask why you say former? And I sure you almost fell out of your chair!

I should note that $10,000 of that debt is a separate loan and doesn’t qualify for the program. So we have to pay that one off regardless. So it’s actually $40,000 that qualifies for the forgiveness. Does this change things? I should have mentioned in my original post.

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Re: Public Service Loan Forgiveness - Non Profit employees

Post by junior » Fri Oct 04, 2019 5:52 pm

Mtangler25 wrote:
Fri Oct 04, 2019 5:30 pm
JimmyD wrote:
Fri Oct 04, 2019 4:58 pm
Mtangler25 wrote:
Fri Oct 04, 2019 4:03 pm
JimmyD wrote:
Fri Oct 04, 2019 2:48 pm
I'm on track to get my wife's $235K (you read that correctly) loans forgiven tax-free in three more years under PSLF. I've made it my part time job to completely understand every nuance of the program over the years.

That said, there's some advice given in this thread (and in sensationalist articles on Forbes) that I would encourage you to disregard, or at least, take with a grain of salt.

My advice is to pursue the program if you can employ tactics to lower the AGI as much as possible, e.g. max the 401k, file taxes separately, etc. Then, do the calculations to understand what the payment would be under the income-based repayment plan and extrapolate that out over ten years. It won't be exact due to raises, inflation, etc, but it will be close enough to give you an idea how that route compares to paying it off in full. There are obviously a lot of factors to consider (you'll probably take a tax hit for filing separately) and it'll be situational as to where or not it makes sense in your individual case, but I would certainly encourage you to run the numbers as opposed to just blindly repaying the balance.
Wow, that's a lot of debt! I appreciate your point of view, but the way I see it is regardless of filing status and no matter how low we get that payment down to. We still are $50K in debt, and my perception is to live frugally, file jointly, halt investing temporarily. And throw an astronomical amount of money at the debt each month, like $2,000/month range. The debt will be paid off quickly.

But I get where you are coming from, I just see debt as a burden and a burden that I don't want to deal with for 10 years (besides a mortgage)

Definitely a TON of debt. I literally almost fell out of my chair when I did her taxes for the first time back when we were dating.

As a former Dave Ramsey discipile myself, I totally get and respect your point of view. If we were dealing with a smaller debt burden, I'd most likely bite the bullet and pay it all off as well, but in our case, it makes more financial sense to maximize all of our tax-advantaged investments and just pay the bare minimum on the loan.
May I ask why you say former? And I sure you almost fell out of your chair!

I should note that $10,000 of that debt is a separate loan and doesn’t qualify for the program. So we have to pay that one off regardless. So it’s actually $40,000 that qualifies for the forgiveness. Does this change things? I should have mentioned in my original post.
You should be able to find calculators online estimating what would be forgiven given your career earning assumptions.

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Re: Public Service Loan Forgiveness - Non Profit employees

Post by Naris » Fri Oct 04, 2019 6:17 pm

Mtangler25 wrote:
Fri Oct 04, 2019 5:30 pm
I should note that $10,000 of that debt is a separate loan and doesn’t qualify for the program. So we have to pay that one off regardless. So it’s actually $40,000 that qualifies for the forgiveness. Does this change things? I should have mentioned in my original post.
Yes, that fact makes PSLF materially less attractive for you. I think it could still technically be profitable if you pulled it off perfectly, but (even as someone who generally likes the PSLF option) I can't see why you'd want to in your situation.

Additionally, only monthly payments made while working full-time in eligible employment count, which would not fit with your wife working part-time while raising a family. This could be a major issue from a lifestyle / life planning perspective and would be reason enough for me to rule the option out in the situation you described.

EDIT: I agree with the suggestion made above to refinance all of your wife's student loans with a variable 5 year term, to minimize the interest rate, and then focus on paying it down promptly.
Last edited by Naris on Fri Oct 04, 2019 6:20 pm, edited 1 time in total.

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Re: Public Service Loan Forgiveness - Non Profit employees

Post by niceguy7376 » Fri Oct 04, 2019 6:17 pm

JimmyD wrote:
Fri Oct 04, 2019 2:48 pm
I'm on track to get my wife's $235K (you read that correctly) loans forgiven tax-free in three more years under PSLF.
What is the career of your spouse and income that they make and the loan that they had when they completed the studies?

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Re: Public Service Loan Forgiveness - Non Profit employees

Post by niceguy7376 » Fri Oct 04, 2019 6:19 pm

Mtangler25 wrote:
Fri Oct 04, 2019 11:15 am
My wife just graduated with her second degree, she is a Nurse and got a job at our local hospital which is a non-profit.
What would be her salary at this non-profit?
What would be her salary if she goes to a for-profit institution for similar job?

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Re: Public Service Loan Forgiveness - Non Profit employees

Post by Mtangler25 » Fri Oct 04, 2019 6:57 pm

niceguy7376 wrote:
Fri Oct 04, 2019 6:19 pm
Mtangler25 wrote:
Fri Oct 04, 2019 11:15 am
My wife just graduated with her second degree, she is a Nurse and got a job at our local hospital which is a non-profit.
What would be her salary at this non-profit?
What would be her salary if she goes to a for-profit institution for similar job?
Only one hospital in town, she in a nurse. The hospital is a non profit. She makes roughly $48K before taxes.

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Re: Public Service Loan Forgiveness - Non Profit employees

Post by Mtangler25 » Fri Oct 04, 2019 6:58 pm

niceguy7376 wrote:
Fri Oct 04, 2019 6:17 pm
JimmyD wrote:
Fri Oct 04, 2019 2:48 pm
I'm on track to get my wife's $235K (you read that correctly) loans forgiven tax-free in three more years under PSLF.
What is the career of your spouse and income that they make and the loan that they had when they completed the studies?
Career: Nurse

Salary: $48K

This is her second degree. $50K in debt for two degrees

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Re: Public Service Loan Forgiveness - Non Profit employees

Post by F150HD » Sat Oct 05, 2019 4:03 pm

You stated you could probably pay this off in one-ish year...I would just do that and move on with life I wouldn't even hassle with it.
Long is the way and hard, that out of Hell leads up to light.

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Re: Public Service Loan Forgiveness - Non Profit employees

Post by fru-gal » Sat Oct 05, 2019 4:14 pm

I haven't had a chance to read all the replies, but I read in the news recently that almost no one is granted this, even if they have been working for years at a job that they had been led to believe qualified. The rules are very convoluted and trap the unwary.

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Re: Public Service Loan Forgiveness - Non Profit employees

Post by krow36 » Sat Oct 05, 2019 10:10 pm

Ron Lieber of the New York Times has written a series of articles about the problems of the student loan forgiveness program.
https://www.nytimes.com/2019/02/22/your ... ion=Footer

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Re: Public Service Loan Forgiveness - Non Profit employees

Post by JimmyD » Sun Oct 06, 2019 4:45 am

fru-gal wrote:
Sat Oct 05, 2019 4:14 pm
I haven't had a chance to read all the replies, but I read in the news recently that almost no one is granted this, even if they have been working for years at a job that they had been led to believe qualified. The rules are very convoluted and trap the unwary.
To this point, in literally every one of these dozens of articles I've read over the last year or so, the problem is that the borrowers did not correctly fulfill their obligations.

I'm the last person to defend the PSLF program and the Department of Education, however with tens (or hundreds) of thousands of dollars on the line, you'd think folks would actually do their homework as opposed to taking a random student learn servicer rep's word for it.

I'm sorry, but I've spent countless hours studying the details and nuances of the program to ensure we become and remain qualified. It's hard to feel sympathy for those who aren't willing to do the same.

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Re: Public Service Loan Forgiveness - Non Profit employees

Post by fru-gal » Sun Oct 06, 2019 7:09 am

JimmyD wrote:
Sun Oct 06, 2019 4:45 am
fru-gal wrote:
Sat Oct 05, 2019 4:14 pm
I haven't had a chance to read all the replies, but I read in the news recently that almost no one is granted this, even if they have been working for years at a job that they had been led to believe qualified. The rules are very convoluted and trap the unwary.
To this point, in literally every one of these dozens of articles I've read over the last year or so, the problem is that the borrowers did not correctly fulfill their obligations.

I'm the last person to defend the PSLF program and the Department of Education, however with tens (or hundreds) of thousands of dollars on the line, you'd think folks would actually do their homework as opposed to taking a random student learn servicer rep's word for it.

I'm sorry, but I've spent countless hours studying the details and nuances of the program to ensure we become and remain qualified. It's hard to feel sympathy for those who aren't willing to do the same.
Since one of the ways you can get trapped is to pay in advance and have that not count as paying on time, I hardly think that means people are sloppy.

No one should have to spend "countless hours" to determine their qualifications.

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