Clarity on loan payments, much needed

Home Student Loan Management Clarity on loan payments, much needed

  • Avatar bskur13 
    Status: Resident
    Posts: 1
    Joined: 04/10/2019

    Yes I have read all the WCI posts on REPAYE vs PAYE vs Refinancing/Consolidation and I am still quite lost, or perhaps just ignorant. So to get to the point, I am a graduating 4th year med student entering into a 5 year orthopedic residency.

    My loan burden is: $250,000 in student loan debt with $215,000 in a Stafford unsubsidized and $35,000 in Graduate PLUS loan. I am currently married and my spouse has student loan debt as well but she works in a non-medical related field so she has been paying on loans for the past 3 years.

    My conundrum is what the best option is. I have applied and looked at all the projection calculators for what my monthly payments will be and I just don’t know which I should choose. If I used Laurel Ridge and refinanced my loans I would be paying $100/month during residency on my interest and then at 5.39% interest over 10 years after graduating and paying on my principle. The payments are around $3000/month but I would done in 10 years and I wouldn’t have to stick to a non-profit for 10 years. Using PAYE its around $200-300/month and paying over a 120 month period and then fingers crossed hoping PSLF comes through and forgives the rest. And pretty much similar for RePAYE.

    So I am hoping someone out there can just offer advice on what avenue is best. I am just worried about the state of affairs with PAYE and PSLF in terms of 1. Is the forgiveness going to be taxable income? and 2. Is PSLF something I should depend on to forgive all my loans?

    Any advice/words of wisdom on personal experience would be greatly appreciated!

    #205531 Reply
    Avatar pierre 
    Status: Resident
    Posts: 211
    Joined: 02/01/2016

    PSLF is not taxable

    #205559 Reply
    Avatar DCdoc 
    Status: Physician
    Posts: 607
    Joined: 06/14/2016

    Maybe I’m old or just stubborn or both (most likely) but if j take out a loan and promise to repay it, I do that. I wouldn’t look for the government to bail me out. That isn’t a moral judgement, but too many people seem to want their loans magically erases while simultaneously seeking reassurance they won’t be shafted by the same government entity.

    #205563 Reply
    Faithful Steward Faithful Steward 
    Status: Financial Advisor, Small Business Owner
    Posts: 519
    Joined: 06/12/2017
    1. Is the forgiveness going to be taxable income? and
    2. Is PSLF something I should depend on to forgive all my loans?
    Click to expand…

    1. No. PSLF loan forgiveness is not taxable.

    2. I don’t think you can depend upon it 100%. But it is the law of the land, today. Plus, there is talk that if changes are made to the progra, those already enrolled would be grandfathered, but that’s not a given. Plus, there is always the chance that at some point you may choose to pursue a different career path.

    That said, I recommend my clients pursuing PSLF get on the payment plan with the lowest payment possible. Then start a side-fund where they contribute the difference between their IBR payment amount and their PAYE/REPAYE payment amount. This side fund is earmarked for paying off their loans if they ever leave PSLF or if the program goes away. If that never happens, once their loans are forgiven, they have a nice chunk of money that can be repurposed for other financial priorities.

    Michael Peterson, CFP® | Faithful Steward Wealth Advisors | (717) 496-0900

    #205568 Reply
    Avatar HandFellow 
    Status: Physician
    Posts: 216
    Joined: 01/18/2016

    If you are in a higher paying specialty, I would focus on keeping the principal from growing during training and then paying it off rapidly during your first few years of work.  Sure you can go for PSLF as you will likely do a fellowship and will be 4 years from forgiveness but you won’t have the flexibility you want after training.  Realistically, 250k isn’t a huge number compared to others and compared to what your salary will likely be.

    With a working spouse, we tried to keep up with the interest and then just took care of the loans quickly after residency ended.  If you have 2 salaries, doing PAYE or REPAYE shouldn’t be that much of a burden.   Or of course you can refi and pay minimum amounts.

    #205571 Reply
    Lordosis Lordosis 
    Status: Physician
    Posts: 2186
    Joined: 02/11/2019

    Come on Ortho with only 250k in debt. You are going to have less then 1x debt as soon as you are done with training. With a working spouse you might even have most of it gone before then. Live like the resident you are and service that debt.

    Also don’t forget the Roth.

    “Never let your sense of morals prevent you from doing what is right.”

    #205593 Reply
    Liked by bskur13, SLC OB
    Avatar kstarm 
    Status: Physician
    Posts: 14
    Joined: 11/02/2018

    I guess I don’t know for sure but I would think private practice ortho would provide much more income than a practice that PSLF would qualify for. Do you have some idea of what income is for PSLF vs other practices might be?

    Also my brother in law when negotiating his job asked for a loan repayment bonus as he would have to give up PSLF to take the job and the private practice group agreed to this. If he stays 5 years they will pay off a significant chunk of what he has left (it is actually just a bonus he can do whatever he wants with the money, but the idea is for his loans). So there may be some other ways to get at loan repayment if that is a focus for you.

    #205809 Reply

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