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Minimizing IBR vs Roth

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  • #16

    I don’t mind at all and appreciate you thinking into it. Yes I’ll make 54k as PGY2 and she will make 49k this year.
    Click to expand...

    My apologies...I should have asked several more questions:

    • What's your total federal student loan debt?

    • Does your spouse have any federal student debt? If so, how much?


    • #17
      I have 141k In debt, she has none.


      • #18
        My initial thoughts given the $141k debt are too much risk, not enough reward in pursuing PSLF combined with MFS PAYE.  As I have stated in this forum, I feel there will be modifications to PSLF in next several years.

        In pursuing your current strategy of PSLF, reducing your PAYE payments by filing separately, you're increasing your tax liability and experiencing significant interest accrual. I estimate that during your 1st PAYE annual period, with $0 payments, you've accrued approximately $9,500 in interest.  After 5 years, assuming MFS AGIs of $0, $26k, $54k, $56k, and $58k, total interest accrual ~ $38k.  Should there be PSLF modification that encourages you to pursue a different repayment strategy, the accrued interest could capitalize.  This, along with the annual increased tax liability by filing separately, would have me rethink this strategy.

        A couple other options:

        • REPAYE to mitigate the interest accrual, benefit from some interest subsidy, file jointly to lower tax liability while still pursuing PSLF, or

        • Refi with a commercial lender in an effort to secure a lower interest rate.


        • #19
          Thanks for the input. I agree with you that the certainty of PSLF is unknown. With regards to this, I think one has two options: 1) you can plan on PSLF (make minimal payments in anticipation of having forgiven as much as possible) with the risk that PSLF legislature will change (and even if it does, hopefully those in will be grandfathered and changes will affect new graduates) or 2) you can not plan on PSLF and begin to pay off debt ASAP. However sitting in the middle with moderate payments out of concern for changes in legislature. However, being on the fence and making moderate payments isn't worthwhile - either you are in or you're out. Yes, interest accrues, but if forgiven, not a big deal. So with that risk, I'm aiming to make minimal payments PAYE and spend ~30K in payments during 7yrs with hope that the rest of my loans (and accrued interest) are forgiven.

          Can someone explain REPAYE better for me? Not finding good comparison between it and PAYE online.


          • #20

            • Payment = (AGI – poverty level for fam size) / 120

            • 50% of unpaid interest each month is subsidized

            • Interest does not capitalize while in the plan (but it still accrues, you just don’t pay interest on interest)

            • Spousal income is always counted in AGI

            • No monthly payment cap


            • Payment = the lesser of (AGI – poverty level for fam size) / 120 or 10-yr std at time of entering plan

            • Interest does not capitalize until you no longer have a partial financial hardship (if calc’d payment > 10-yr std)

            • Interest capitalizion is maxed at 10% of intial principal (e.g. if prin was $150,000, its max at capitalization is $165,000)

            • Can exclude spousal income by filing taxes separately

            • Monthly payment capped at 10-yr standard

            Attached is the slide from the lecture I give to our students and residents on the subject.