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Pay Off Loans in One Payment or Invest (with PSLF as an aim)

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  • Pay Off Loans in One Payment or Invest (with PSLF as an aim)

    Hello, all! New to the forum. Loving all of the helpful information.

    I am currently sitting at $440k in student loan debt. I am in a fortunate position that my father wants to pay off the student loans in one payment (for me to pay off to him) as a way to avoid the accruing interest.

    However, while I don't have a full picture of whether my career will fit the PSLF, I would like to try for it. My understanding is that a PSLF side fund is probably the most appropriate way to approach this. My other thought, given my age and point in my career, that I should be investing it relatively aggressively, especially since I have always felt like I could handle all of my loans and such without any help. On top of this, I feel like I could forego using the money all together for loan payment if I exit my plan for PSLF early and withdrawing early isn't a good option, which would make it a 10+ year investment.

    Is my thinking correct here or should I just pay off the loans in one payment now?

  • #2
    What specialty? Sounds like your parents have plenty of money so I don't think it matters when you do it if you decide to go that route.

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    • #3
      If your anticipated income is going to be around your loan burden then I would just pay it off. If you're in a traditionally low paying specialty then that complicates things.

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      • #4
        To clarify, your father is going to loan you $440k interest free?

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        • #5
          I haven't finished just yet, but I will be aiming for oncology or go internist.

          And, yes, the loan would be interest free.

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          • #6
            Originally posted by trebbag View Post
            Hello, all! New to the forum. Loving all of the helpful information.

            I am currently sitting at $440k in student loan debt. I am in a fortunate position that my father wants to pay off the student loans in one payment (for me to pay off to him) as a way to avoid the accruing interest.

            However, while I don't have a full picture of whether my career will fit the PSLF, I would like to try for it. My understanding is that a PSLF side fund is probably the most appropriate way to approach this. My other thought, given my age and point in my career, that I should be investing it relatively aggressively, especially since I have always felt like I could handle all of my loans and such without any help. On top of this, I feel like I could forego using the money all together for loan payment if I exit my plan for PSLF early and withdrawing early isn't a good option, which would make it a 10+ year investment.

            Is my thinking correct here or should I just pay off the loans in one payment now?
            I would wait until at least the summer before your father pays it off, to see who is the presidential nominee. You don't want to pay it off and then find out there may be new avenues of forgiveness next year....

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            • #7
              Originally posted by xraygoggles View Post

              I would wait until at least the summer before your father pays it off, to see who is the presidential nominee. You don't want to pay it off and then find out there may be new avenues of forgiveness next year....
              With his interest accumulating at 2-3 K a month I do not think waiting around for a .000001% chance of that happening is a good idea.

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              • #8
                Originally posted by trebbag View Post

                My understanding is that a PSLF side fund is probably the most appropriate way to approach this. My other thought, given my age and point in my career, that I should be investing it relatively aggressively, especially since I have always felt like I could handle all of my loans and such without any help. On top of this, I feel like I could forego using the money all together for loan payment if I exit my plan for PSLF early and withdrawing early isn't a good option, which would make it a 10+ year investment.

                Is my thinking correct here or should I just pay off the loans in one payment now?
                "Appropriate" is in the eye of the beholder. At $440k in loans, PSLF is pretty darn enticing and I think even more so with a pretty solid 'back-up' plan. Getting that potentially forgiven is just too good a deal to not consider and I think I would likely go for it. That's legit life altering money there and kinda puts in perspective some of the penny-pinching we do on this board (ie. should i switch from mutual fund to ETF because the ETF is .01 cheaper?!). The real question is how disciplined are you to actually keep it as a 'side fund' and not spend - as long as you are comfortable there, that's what I'd do.

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                • #9
                  Where are you in your training?
                  Are you planning on fellowship?
                  Internist and oncology have different comps.
                  The “interest free” you probably need to fudge a little bit (rates are historically low, so paper it up for the IRS and think about giving dear old dad a little thank you interest) but put it on paper.
                  7 yrs getting the interest subsidy in training is tempting. That leaves 3 capped and a potentially nice PSLF.
                  Leave it like that until you get clarity.

                  The biggest risk is how bad does your dad need the funds paid back? I would think hard simply because you have a potentially long road with risk. Something happens to you, dad gets hurt too.

                  Probably repaye until you get clarity on the career and PSLF. Keeps all options open, plus build the reserve fund. If you can keep both options open, why not?

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