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PSLF 10-year vs IRB 25-year Loan Forgiveness

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  • #16




    OK, so p much an average of 5.51% on $267,000, given the proportion of the loans and rates.

    Given the following:

    • Adjusted gross income: $210,000

    • Family size: 2

    • Location: lower 48 states (not AK/HI)

    • Assuming married filing jointly (both debts and incomes counted since I don’t know your individual incomes)

    • Your RePAYE would be $1,549.75 monthly the first year ([income – 1.5*poverty] / 120, defined as 10% of disposable income)

    • Your IBR would be $2,324.63 monthly the first year ([income – 1.5*poverty] / 80, defined as 15% of disposable income)

    • The 10-yr standard payment would be $2,899.20 monthly (IBR and PAYE are capped at this, RePAYE isn’t)

    • Interest accrued monthly at 5.512% on $267,000 = $1,226.35, meaning there wouldn’t be any interest subsidy from RePAYE anyway.


    Assuming your income increases 5% each year, doing RePAYE, you would pay a total of $413,864 over 179 payments (14 years 11 months).  You wouldn’t make it out to the 25-year forgiveness, anyway.

    IBR would have you paid off a total of $359,212 over 130 payments (10 years, 10 months).  Again, you’re not making it out to the 25-year forgiveness anyway.  You’d hit the 10-yr std monthly repayment cap in your 6th year.

    If you did PSLF and RePAYE, over 120 payments (10 years), you’d have paid $240,106 over the life of the loan.  $151,052.48 would be forgiven.  That’s a big risk to take in case the untaxed forgiveness is capped in coming years which, if Trump’s first week in office has shown anything, is probably going to happen.

    On the other hand, if you could do a private refinance to 4.5% over 10 years, you’d pay $2,767.15/month at a total paid of $332,057, saving you $81,806 over the life of the loan from if you did RePAYE without PSLF and $17,155 over straight IBR.  That would comprise 15.8% of your total annual income your first year, which your budget should be able to accommodate (if that’s not the case, you might have a planning, spending, or budgeting issue).  Especially if you can get a better private refinance rate than that (SoFi starts 10-yr at 4.49% fixed and 3.145% variable) or, even better, pay it off over a shorter term like 5 or 7 years, you’d be even better off.
    Click to expand...


    fantastic post.

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    • #17


      OK, so p much an average of 5.51% on $267,000, given the proportion of the loans and rates.....
      Click to expand...


      Wow, great post, DMFA. You're really selling your spreadsheet well with a post like that. I still need to get around to putting in my own numbers and tinkering with it.

      Comment


      • #18
        ishutes, if your interest is currently accumulating on your $97,000 under IBR, you might want to look into the consolidation of your loans and do the math on whether or not PSLF is viable. If you are eligible to calculate your payments under married filing separately, it might be worth it.

        If you want to explore it further, I would need to know a couple more things:
        What is the breakdown of your's and your future husband's income?
        Do you or your future husband have a student loan dated prior to 10/1/2007?
        Will your future husband's work be eligible for PSLF?

        Somebody made the comment about not locking into PSLF eligible employers. I totally agree. But, if you are currently in a PSLF eligible loan and employment, why not do the paperwork to get the forgiveness? Can't hurt. Even if the program goes away, you may be grandfathered in. Can't be sure what that might look like but it is pretty typical of what happens when the government takes away a benefit.

        The general intent behind PSLF is to encourage professionals to take lower paying positions from the government or charities. If you are presented with a private employment opportunity that will more than pay the difference between PSLF and just paying off the loan, feel free to move on.

        Just my .02 cents.

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        • #19
          I've been working for a PSLF eligible employer for years, but my 'loans' do not qualify because they are pre-2008 or whatever and thus FFEL as opposed to Direct. So all the PSLF years are lost for me. That's what I was initially trying to clarify.

          Husband makes $75K/year, not sure about me. I may do travel contracts for a while in which case it's variable, I may take something full time with a long commute in which case $120-160K, or I may take time off to learn coding/software development with my husband as we are just getting started with that. Or work on the businesses in which case again, who knows. His work would not qualify for PSLF for as far as we can see, he does better in the public sector with I/O research & data analytics.

          I'm not a finance expert and I appreciate affiliate relationships but reconsolidating definitely makes no sense for me since the interest rates are higher than what I have currently. Also the payments are higher than what we have left after deductions & child support on his salary alone. I'm likely better off staying on the IRB with a lower interest rate and sending extra when I can. Which is most of the time as we are very frugal and have no other expenses but utilities. I had a major financial setback in the housing crisis of 08 we have come out of, and he just graduated. So no, we are not contending with bad lifestyle choices or living beyond our means. We are getting moved & working on figuring out our situation, including what kind of work I'm taking on next.

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          • #20




             

            I’m not a finance expert and I appreciate affiliate relationships but reconsolidating definitely makes no sense for me since the interest rates are higher than what I have currently. Also the payments are higher than what we have left after deductions & child support on his salary alone. I’m likely better off staying on the IRB with a lower interest rate and sending extra when I can.
            Click to expand...


            It's a shame that you lost the 7.5 years of PSLF eligibility.

            If you do end up taking a job that is eligible for PSLF in the future, you may want to pursue the consolidation route. The interest rates will not be higher. The interest rate "is based on the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of 1%." from studentaid.ed.gov website.

            If you are eligible for PAYE or RePAYE, they are based on 10% of you salary versus the 15% for IBR. Also, your husband's salary and student loan debt will be used in the calculation on your payment. The deductions and child support will effect any of the payments similarly. Your payment will most definitely go down.

            Best of luck on your new job.

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