Advice on loan repayment and repayment calculator accuracy?

[matt7777]

Hi all, long time reader of the blog and forums. I am hoping for some guidance in choosing what to do with me and my wife’s loans. We are both physicians. I am working at an institution that qualifies for PSLF and she does not (there is no good 503b option for PCP positions where we live)

Me, hospitalist: 150k debt at 6.8%, 230k salary, AGI around 185k

Wife, part time PCP: 250k debt at 6.8%, 110k salary, AGI around 87k

1 child, maybe 2 eventually.

Having been filing separately in the past while residents.

Our jobs and salaries are not expected to drastically change.

 

The question centers around the accuracy of the repayment calculator available here:

https://studentloans.gov/myDirectLoan/repaymentEstimator.action

 

When I put in the scenario where we both keep our federal loans and file jointly, the calculator says I can keep paying in REPAYE, PAYE, IBR, which under PSLF will save me a lot more (it quotes 126k total paid under REPAYE, with 129k forgiven). My wifes loan gets totaled at 340k paid with a $2,800 per month payment.

 

This is in contrast to married filing separately with her loans refinanced to try and save money from that standpoint. Under this setup I qualify for PAYE, paying 192k, with 37k forgiven. My wifes refinanced loan comes in around 285-320k depending on the 10 vs 7 year and interest, saving potentially 22k-37k compared to the standard payment. The higher savings for her obviously comes with a 7 year term, which offers a lower interest, coming in at a payment of around $3,200.

 

So as far as I can tell, IF the calculator is accurate, then what makes the most sense is using the first option, but paying my wife’s loan off at an accelerated rate. Paying off her standard plan loan at the $3,200 saves 20k. I could probably even pay more monthly since the REPAYE plan in this case would be less each month than PAYE in the second scenario.

 

So coming together we would pay 126+320 for filing jointly VS 192+285:  446 vs 473. Not to mention extra tax savings for filing jointly, and possibly leveraging my lower payment to pay her loan even quicker.

 

So the question is: Is the calculator accurate? Does my wifes income to debt ratio really affect MY payment that much if she stays with the federal loans. If the calculator says I’ll pay X with REPAYE will it be right? Our jobs/salaries will not change.

 

Thank you all for your time!

[Joy Sorensen Navarre Navigate]

Good questions! They deserve careful tailored student loan advice due the many variables. For example, it's difficult to project future savings without knowing how many payments you made toward the 120 and how many remain.

In general, in my experience, married physicians (both with student loans) often find increased savings using the REPAYE repayment plan and filing taxes 'Married Jointly'. This would support your findings.

In a case where one spouse pursues PSLF and the other does not, it will be important to consider how best to make the non-PSLF spouse's payments.

Feel free to reach out to me to schedule a student loan consult at the WCI Reader discounted rates.

[DMFA]

It is definitely possible to pay more over the life of a loan at 6.8% over 10 years with income-driven payments and forgiveness than it is at 3.5% or so over 7 years. This is actually my wife's current situation and why we are changing hers from PAYE/PSLF to a private refi when she has to recertify income next month.

I have a calc that imo works better than theirs - I'll run it (for entertainment purposes only, lol)

[matt7777]

Thanks for the replies.

I am already 3 years into my 120 payments for PSLF.

@DMFA; if this is the same calculator you have posted, it is suggesting PAYE is more forgiveness than REPAYE when I try it out.

I certainly see what you mean about paying in IBR with forgiveness vs a refinanced loan. Refinancing our entire burden ($400k) at 4% for 7 years is around 459k, right in the middle of the 446 vs 473 I listed above. Though the payment would be almost 5500 which is cutting it closer than I'd like with savings etc.