PSLF (REPAYE/PAYE) vs. Refinancing Student Loans

Home Student Loan Management PSLF (REPAYE/PAYE) vs. Refinancing Student Loans

  • Avatar LSUmed 
    Status: Resident
    Posts: 1
    Joined: 06/11/2019
    Splash Refinancing Bonus

    Hey yall, new to the forum here.  I’m married and recently graduated from medical school in May this year.  I have $197k in direct unsubsidized student loans at 6% interest (once I consolidate.)  My spouse makes $70k per year (no debt), and I’ll be at $53000 starting July.

    I can’t for the life of me decide what to do in terms of loan repayment.  I keeps me up at night.   Through REPAYE we only get a small interest subsidy benefit as our AGI combined is relatively high ($123k).  I think it’s around $820 at 10% discretionary income/ month and my interest is around $960.  We’re renting at $1550 a month.  I think we could afford $2370/month but it would make it difficult to fund an investment account and to save for a future home down payment. I’ve read about filing for taxes before residency and claiming a $0 salary so that if I chose PAYE, I wouldn’t have to make a payment for the first year.  With REPAYE I guess at a $0 salary it would still count my wife’s salary and I get a better subsidy that first year.  I’m so hesitant about PSLF as so few people actually had their loans forgiven last year, and I don’t know if I’ll work at 403(b) non-profit or whatever after residency.  I’m thinking about refinancing through Laurel road which can give me 4.74% 10 year fixed interest.  Plus, as a resident they would only require monthly payments of $100.  Obviously we would pay a little more than that as we no longer have the forgiveness opportunity to fall on, but whatever the amount we choose, it would be better than $800+ for REPAYE.    They could even do a 4.18% variable loan at 7 year.  As a future anesthesiologist in the south with a salary ranging around $350/year, I may be able to crush the remaining in those first 3 years post residency. My dilemma is whether to trust in the PSLF or not.  There’s so many variables in play over the next 10 years that could prevent me from completing the PSLF plan.  I feel like I have to commit ultimately one way or another.
    **PAYE we’d file separately. REPAYE and Refinance we’d file jointly.**

    PAYE: Hopefully $0 for first year…  ~$280 years 2-4… ~2100 years 5-10 (capped standard pay). Pray to God that everything worked and I’m forgiven; or I’ll have a TON of accumulated interest.
    REPAYE: Hopefully like $340-400 first year with subsidy… $820 years 2-4…. then either switch to PAYE and complete PSLF or refinance.  I feel like this is more of a middle route b/c of how much we’ll have to pay through residency that I may end up completing this whole loan before the 10 year amount is up.  So PSLF is probably no in play if I choose REPAYE.
    Refinance now: lower interest rate, decide for ourselves what to pay each month, crush it after residency

    Anyone have any recommendations?  I’m leaning toward getting the better interest rate now.

    Thanks for any advice yall can give! I appreciate it!


    #221065 Reply
    Avatar pierre 
    Status: Resident
    Posts: 180
    Joined: 02/01/2016

    You don’t have to decide now.

    Any ideas on where you want to work when you are done? How many PSLF jobs are available in the area? If it were me I would base the decision to refi vs stay in IBR plan on what the odds are that I would end up working for a qualifying employer.

    It will cost you approximately $4k/year in interest to stay in IBR while you make up your mind. Not the end of the world.

    #221093 Reply
    Avatar osteoson56 
    Status: Student
    Posts: 21
    Joined: 12/04/2018

    I am in a similar situation as you. 350K in loan debt, wife makes 60k a year with no debt herself, and I’m starting a 3 year EM residency. We decided we did not want to rely on PSLF programs and that we wanted to attack our loans. We refinanced to a 10 year term at 4.57%. The company allows you to pay like $100/month during residency and the term starts once you’re an attending. We are going to throw all of my money from residency at the interest and principle with the goal to get below 280K once I graduate. Then we’re going to throw whatever signing bonus I get at the loans, remain frugal for 2 or 3 years and knock them out. I figure if my ortho and gen surgery buddies can go 5+ years making resident money then I can live like a resident for an extra 2-3 post residency. We took this approach with the help of an ER doc mentor of mine who was again in a similar situation. He’s been an attending for like 7 or 8 years now, and is able to retire (he won’t but he could) in his early 40’s. Not saying this approach is the best or for everyone but it’s the one we’re sticking to and it feels good to have a plan which is totally self-reliant and I don’t have to worry about making loan payments for the next 20 years or if PSLF is still gonna be around.

    #221370 Reply
    Avatar Allixi 
    Status: Physician
    Posts: 110
    Joined: 03/16/2016

    $197,000 x 0.06 = $11,820 in interest / year, or $985 / month. With 2 incomes totaling ~120K, you should be able to make these payments easily during residency, while maxing out two Roth IRAs. If you were diligent you could even max out a 401k/403b too, but you should contribute at least whatever amount is matched (if any) by the program.

    You would still have ~$200K when you finish. You can pay this off in 3 years easy (I did it in 2.6 and you will almost certainly make more than me), if you continue living like a resident and limit your other expenses. I have no doubt you could pull this off.

    So you’re looking at maybe 6 more years of payments. Why mess with PSLF, 10 more years of uncertainty, and limiting your job opportunities upon finishing? If you’re having sleepless nights now, what are you going to do when there’s more serious talk of capping or scrapping the program? Just refinance now – I haven’t checked rates recently but 4-5% should be attainable.

    #221375 Reply
    Liked by osteoson56

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