Fiances Loan Situation

[jsr52]

Hi All,

Currently in 1st year of GI Fellowship:

My loans ~200,000, still paying IBR, but once moonlighting kicks up will start throwing more money at them, then refinance in year or two, and pay down heavy as I will likely go into private practice. Also saving for a wedding so it's tough to be as aggressive as I would like.

Fiance is a Child Psychologist and Has ~200,000 in loans from grad school and PhD program. She just started IBR payments this month and qualifies for PSLF. She will likely remain in a school system for her career and thus PSLF may be a good option. In two years (2018 tax season) when we file taxes together her monthly payment will kick up from 100/month to ~1500/month. She may take a year off from work at some point when we have children.

1) If we still make payments during her time off does that count to the 120 payments needed for PSLF? My guess is it doesn't, if shes on maternity leave do those payments count?

2) Does it even make sense for her to continue with PSLF, after 10 years I'm guessing she will have ~75,000 forgiven in loans which I know we will then get taxed on, and could anyone recommend a good loan calculator for sorting this out.

[The White Coat Investor]

Be sure to explore keeping your fiance in IBR or PAYE and filing MFS. Your situation is complicated and it is probably worth paying a couple hundred bucks to a pro to sit down with you and run the numbers.

1) No. Only payments made while working full-time for a 501(c)3 count.

2) You don't get taxed on PSLF forgiveness. There was a loan calculator posted here a few months ago. I can't vouch for its accuracy. Let me see if I can find it: https://www.whitecoatinvestor.com/forums/topic/test-this-student-loan-calculator/

[jsr52]

She is currently in REPAYE, my understanding is that under REPAYE whether you file separately or together, REPAYE still looks at your spouses income.

[DMFA]

jsr52 wrote:

Hi All,

Currently in 1st year of GI Fellowship:

My loans ~200,000, still paying IBR, but once moonlighting kicks up will start throwing more money at them, then refinance in year or two, and pay down heavy as I will likely go into private practice. Also saving for a wedding so it’s tough to be as aggressive as I would like.

Fiance is a Child Psychologist and Has ~200,000 in loans from grad school and PhD program. She just started IBR payments this month and qualifies for PSLF. She will likely remain in a school system for her career and thus PSLF may be a good option. In two years (2018 tax season) when we file taxes together her monthly payment will kick up from 100/month to ~1500/month. She may take a year off from work at some point when we have children.

1) If we still make payments during her time off does that count to the 120 payments needed for PSLF? My guess is it doesn’t, if shes on maternity leave do those payments count?

2) Does it even make sense for her to continue with PSLF, after 10 years I’m guessing she will have ~75,000 forgiven in loans which I know we will then get taxed on, and could anyone recommend a good loan calculator for sorting this out.

Click to expand...

1. Every payment you make under a 10-year standard -or- income-driven repayment program (RePAYE, PAYE, IBR, ICR) counts toward the 120 for PSLF -if- you are a full-time W-2 employee of a non-profit as certified by them annually.  If she is not working during that year, she wouldn't be eligible for those payments, but your payment during that time will be less (you're right that RePAYE always includes spousal income).  Maternity leave payments are still made while a full-time employee, and she should remain certified as long as she averages 30 hours weekly for the whole year (see the PSLF form).


2. PSLF forgiveness is untaxed.  You're thinking of full-term income-driven repayment forgiveness (e.g. 25-year RePAYE), which is counted as taxable income.  More on this later...

A few more points:

• Do not conflate IBR with all income-driven repayment (including RePAYE and PAYE).  They have very different terms.


• If filing jointly, income-driven repayment plans account for both spouses' incomes and student debts (if both are federal).


• If not doing PSLF, you would likely be best served by limiting both payment and interest accrual with RePAYE now while your income is low, and then by a private refinance to a 5-year variable (e.g. SoFi at 2.11%) when your income is high enough.


• Has your wife certified her PSLF-eligible employment and payments with her servicer?  This is an active step that you need to take; your servicer won't do this for you.


• PSLF is not necessarily set in stone.  A Congress not apologetic to forgiving the massive student debt of high-income professionals might limit or do away with it; in such a case, being "grandfathered" in is very likely, but one should start a "just in case" fund in a taxable brokerage account if the forgiveness does end up becoming taxed.


• Unsolicited advice, I know, but...are you *sure* you want to blow lots of money on a wedding?

My calculator WCI linked above was not set up to deal with two spouses' debts, just one at a time, and since income-driven accounts for both incomes and debts (if filing jointly), it might over-estimate your combined payments if you calculate it separately.  However, you could put the combined debt (and proportional interest rate) and it should work, esp if you're both on the same plan (hopefully is RePAYE; if not, consider switching).

[nachos31]

The White Coat Investor wrote:

Your situation is complicated and it is probably worth paying a couple hundred bucks to a pro to sit down with you and run the numbers.

Click to expand...

Or wait till DMFA chimes in. Argh, he beat me to my snarky comment!

[Joy Sorensen Navarre Navigate]

Great advice from DMFA--especially about the time off for maternity leave. It includes MFLA. "Vacation or leave time provided by the employer or leave taken for a condition that is a qualifying reason for leave under the Family and Medical Leave Act is equivalent to hours worked in qualifying employment." Emphasis mine.

This is a complex situation. I'd guess the payment amount your household pays (and your income taxes, if you are MFS for IBR) may be lower with both of you on REPAYE while you are in training. There are a number of related questions: impact of interest capitalization, same or different loan servicers. It would be worth a consult with us or another WCI professional to run the numbers.