Student Loan Repayment Questions

[wciabc123]

Hey there, having a hard time figuring out the best option for me in terms of loan repayment. I'm a lil terrible in financial jargon so I may be overthinking this or just not really getting it. I've used the loan simulator studentaid.gov provided and it says REPAYE is best option. However, it's not taking into account the spike in my salary after residency.
Essentially, I will be 140k (principal 127k) in debt starting residency this july with average interest rate of 5.9%. Salary for next 4 years ranges from 57-60k, but this will most likely quadruple after 4 years to 250k-300k.

I have two questions here:

1) With REPAYE, it says I will pay 10% of my discretionary income (around 2000-2750 a month after residency if I understand this correctly), which means I'll actually be paying more than the 10 year standard repayment option in my attending years, no? PSLF is something I'm interested in, but with my loan not being too terrible it doesn't really seem like it will benefit me all that much since with REPAYE, I'd have paid my loans off in around 5 years anyway. I also plan to work in an opioid treatment program, of which are offering 75k in loan repayment for exchange of 3 years in service. This would shorten the amount of time I'd have to pay after residency even more. With that said, could I switch from REPAYE to PAYE after residency to avoid the no cap that REPAYE has? I want to be able to contribute more for life goals such as supporting family and saving for a house.

2) If the above is not possible, another confusion I have right now is whether or not to refinance my loan or maybe even defer my payments in residency. REPAYE says I'd have to pay around 500 dollars a month in residency (it's taking into account my spouse's salary (60k) and debt (54k). That seems a little hefty though it's probably the cheapest option. If I defer, the interest that capitalizes should be around 33k over 4 years so total would be around 173k in debt after residency. If I refinance and get a lower interest rate, that capitalization will be lower. With the NHSC loan repayment (opioid treatment programs) I mentioned earlier it'd really only be 100k and using a standard repayment plan I could pay that off in 5 years by only contributing around 1.5-2k a month as opposed to 2.5-3k I'd likely pay with REPAYE. As I mentioned above, I just want to be able to save for a house faster/support family earlier in my attending years rather than just continue to throw money at a loan I can manage well by extending the period of repayment.

Would appreciate any advice or help in how to move forward or in my approach to this. Thank you!

[East coast]

Yes, with no cap in Repaye, you can certainly end up paying more monthly than the 10 yr standard plan.

Yes to your bolded comment in question 1. This is likely the optimal and most common option for most residents out there that aren't 100% sure of PSLF. You keep interest down while in Repaye just in case you decide to pay them off, while also keeping PSLF on the table. Your first year's worth of payment shouldn't be anywhere near $500 as it'll be based on last year's taxes - probably more like $150/month in year 1 and assuming no big spikes in compensation $400's in year 2-5 (everything's always a year behind). I've found that just about everyone overestimates payment levels given they don't really know what their AGI will be.

I don't know what exact current refinance rates are, but with your spousal income included it's possible (though i suspect unlikely) that you get decent terms and rate - i'd at least check that out in your situation. You're getting 0% interest right now with federal loans until the end of Sept, so you've time to make a decision and get comfortable with your plan of action.

[wciabc123]

Yes, with no cap in Repaye, you can certainly end up paying more monthly than the 10 yr standard plan.

Yes to your bolded comment in question 1. This is likely the optimal and most common option for most residents out there that aren't 100% sure of PSLF. You keep interest down while in Repaye just in case you decide to pay them off, while also keeping PSLF on the table. Your first year's worth of payment shouldn't be anywhere near $500 as it'll be based on last year's taxes - probably more like $150/month in year 1 and assuming no big spikes in compensation $400's in year 2-5 (everything's always a year behind). I've found that just about everyone overestimates payment levels given they don't really know what their AGI will be.

I don't know what exact current refinance rates are, but with your spousal income included it's possible (though i suspect unlikely) that you get decent terms and rate - i'd at least check that out in your situation. You're getting 0% interest right now with federal loans until the end of Sept, so you've time to make a decision and get comfortable with your plan of action.

Thanks for your reply. I should mention my spouse won't start working full time til around July of 2021 after her dietetic internship finishes up. She's been working part time while in grad school at a nutrition clinic. She made around 20k for 2019 and will probably make half that in 2020. After doing research, realistically speaking her salary should be around 50k not 60k due to where we will be living. That may change some numbers up a bit, correct? Also, my biggest concern is the 400 dollars a month that I'd probably have to pay in the later years of residency under REPAYE. It's a bit much imo. Would it be better to do PAYE in residency and just file separately? Just a little confused on which would save me most money.

[East coast]

That may change some numbers up a bit, correct? Also, my biggest concern is the 400 dollars a month that I'd probably have to pay in the later years of residency under REPAYE. It's a bit much imo. Would it be better to do PAYE in residency and just file separately? Just a little confused on which would save me most money.

There’s really no way to answer “which way will save you money” - you’re not even sure of the answer of “PSLF or not.” If you are going for PSLF, It could makes sense to switch to paye later in residency to lower payments (being careful to make sure you don’t pay too much more in taxes MFS v MFJ). But if you do that and then decide not to go for PSLF after residency, then having switched payment plans will have grown the total paid over time vs having just stayed in Repaye.

I would enter repaye and then reassess in two years. Use all the savings you can from low payment level to load up 401k and IRA.