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Consequence of student loan refinancing

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  • Consequence of student loan refinancing

    My wife and I are both currently in training (we each have three years left). I refinanced about $230k in student loans last year from 6.25% with the government to ~4% with DRB. She still has about $120k with FedLoans at 6.25%. At this point we are pretty sure that I'm going to go into private practice, while she will work in an academic setting (as most pediatric endocrinologists do). Thus our repayment strategy has been PSLF for her (minimum monthly payment through PAYE/IBR) in residency while "aggressively" paying down my loans with ~$1K per month (DRB only requires $100/mo while in residency).

    Until recently, her monthly payment has been $180, but we recently renewed her income-driven plan (based on joint tax filing) and her monthly payment has jumped to about $500 since my loans are no longer considered to be "student loans." Certainly still affordable for us, but also doesn't allow us to maximize the amount potentially forgiven, nor the amount we can use to pay down my loan balance.

    I knew this may happen when I refinanced and based on my math the refinance is still worth it, which is why I went ahead with it. However, does any one know if there are other ways to minimize her required monthly payment. So far the best I have come up with is to look into filing separately next year so that they only take her salary into account instead of our combined income. This should cut her payment in half, freeing up some cash to put toward my balance. Just wanted to see if there were other strategies out there...? Any one with any experience with this problem?

    Thanks!

  • #2
    Your question is a good example of the complexity facing married borrowers. As your situation changes, your options change. I suggest you schedule a follow-up call with your student loan adviser to calculate and compare your new options.

    These are the questions I'd want to look into, run estimates and then compare options:

    1. Is your spouse on the PAYE or IBR repayment plan?

    2. How would changing to REPAYE impact her monthly payment amounts and the total amount owed? If REPAYE is an option, is it better to change plans immediately, or wait until next year?

    3. Will PSLF provide a benefit to your spouse? If so, how much?

    4. Would it make sense for your spouse to consider a private refinance in the future? If so, when?

    --Joy

    P.S. Please visit our CONTACT page to schedule an appointment. www.NavigateStudentLoans.com

     

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