Pay off loans vs PSLF

[Doc_science]

Hi all,

New to the forum and would like to pose a question and see if anyone could help me with some calculations.

My situation: 95K in loans @ 6.5% I have made ~ 50 qualifying payments towards PSLF - 70 more to qualify. I am currently on IBR @ ~ $350/month on my fellowship salary.

I am currently an attending and make ~185K a year and I think my recalculated IBR will likely be ~ 1000/month (I will know after applying in a few weeks with my new AGI).

If I am calculating it correctly, 70 X $1000 = $70,000 leaving about $25K in forgiveness. Of course with 70 more payments will take about 5.8 years to pay off and with interest growth, my loan will likely be closer to $130K and could I suppose that I am actually getting about 60K forgiven?

 

Instead of making $1000/month for the next 5.8 years and apply for PSLF (with the uncertainty), should I just aggressively pay off the loans as soon as possible? I would refinance of course to save some in interest capitalization.

 

Thanks for all the help! Happy to provide more information!

[DMFA]

Are you committed to being a full-time W-2 employee of a non-profit for the next 5+ years?

If so, just stick with it, unless you can make more money or have a better job elsewhere.

I can run the numbers and show my work if you want. Btw that's a low-sounding IBR amount for that income (AGI - 1.5poverty) ÷ 80. Do you have a huge family or something?

[Doc_science]

Thanks for the response.

Im not committed to be honest. I could seek another job with better pay or even do locus work and make a lot more.

 

I am approximating the IBR very crudely. With 150K loans and 60K salary as a fellow, my IBR was something like $550

I am married with no kids and as I said have 95K in loans after making a big lump payment. The IBR for this amount and 60K fellow salary is $300. I multiples that by 3 (as I make 60K x3 now) to come up with $1000.  Am I way off?

 

Would love over to see your math. Very much appreciate the thoughts.

[DMFA]

IBR payment = "15% of monthly discretionary income," defined as your monthly income minus 150% of the poverty line...so algebra reduces the equation to:
0.15 * ([AGI / 12] - [(1.5 * poverty)/12])
= .15 * (AGI - [1.5 * poverty])/12
= (AGI - [1.5 * poverty]) * (.15/12)
= (AGI - [1.5 * poverty]) * .0125
= (AGI - [1.5 x poverty]) ÷ 80

Poverty line is for a family of 2 is $16,240

If your AGI is $180,000, then IBR = (180,000 - [1.5 x 16,240]) ÷ 80 = $1,945.50

Likewise using $60,000, it's about $450. Are you sure you're not in PAYE? That's 10% of discretionary income (2/3 as much as IBR, or divide by 120 instead of 80), which comes out to right around $297/mo for an AGI of $60,000 (which is what you say it is) and $1,300 for AGI $180,000.

A lot of people erroneously label all income-driven plans (RePAYE, PAYE, IBR, ICR) as IBR.

...wait. I'm scratching my head. Why did you make a big lump payment on a loan you were planning on having forgiven? That's just money into the ether. Now, I think, using your income and 70 payments left, if you are on IBR, you might end up paying your balance before even reaching 120 payments...in which case you might do better to refinance to 5-year variable (rates currently in the low 2% range) and just blow it away.

I'll be back at work on Monday and plug your numbers into my spreadsheet then.

[Doc_science]

Thanks for the advice and thoughts.

I made a lump sum payment towards the loans that did not qualify for PSLF. The remaining loans do qualify.

I know for sure that I am currently on IBR

I agree reed that I need to reassess my payment load in IBR vs PAYE vs REPAYE. They should have an online calculator.

Agreed that if I end up paying it back anyway, I will refinance it at a lower rate and pay it off aggressively or pay it back at a reasonable rate and us e the rest of the cash flow for investing. Of course trying to max out my 401K contribution and also the wife's.

Your thoughts, calculations, and ideas are all very much appreciated.

[Doc_science]

Just an update and wondering if anyone could help out a bit also.

Made another payment and have a total of ~ $86K of loans left.

I have a few more months of IBR based on my residency salary ~ $300.

If I reapply for IBR based on my AGI now - it will be ~$1400

If I apply for standard repayment - it will be ~1500 for a 10 years plan I believe.

 

As above, I have about 70 payments left, therefore 70 X 1400 = $98000. So by the time I qualify for PSLF, I will have overpaid my forgiveness amount!

 

So does it make sense to continue to be aggressive with my income and repay the loans???

If that is the case, I should probably refinance to a lower interest rate through SOFI or some other program? Thank you!

[jhwkr542]

Check your math.  If you have $86k in loans, I get the 10 year standard repayment plan @ 6.5% interest to be $976/mo.  This is where IBR would be capped.

[DMFA]

Doc_science wrote:

Just an update and wondering if anyone could help out a bit also.

Made another payment and have a total of ~ $86K of loans left.

I have a few more months of IBR based on my residency salary ~ $300.

If I reapply for IBR based on my AGI now – it will be ~$1400

If I apply for standard repayment – it will be ~1500 for a 10 years plan I believe.

 

As above, I have about 70 payments left, therefore 70 X 1400 = $98000. So by the time I qualify for PSLF, I will have overpaid my forgiveness amount!

 

So does it make sense to continue to be aggressive with my income and repay the loans???

If that is the case, I should probably refinance to a lower interest rate through SOFI or some other program? Thank you!

Click to expand...

It's all about total paid over the life of the loan.  If they're similar, and you don't need the cash flow right now, and you want the greater flexibility (i.e. not being full-time employed by a nonprofit), then I'd consider refinancing to a 5-yr variable and knocking it out.

jhwkr542 wrote:

Check your math.  If you have $86k in loans, I get the 10 year standard repayment plan @ 6.5% interest to be $976/mo.  This is where IBR would be capped.

Click to expand...

It's off of the balance upon entering repayment, not the current balance.

 

[Doc_science]

 Thanks for the match check.

I think refinance and aggressive payment will be my method of attack