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$215,407 in student loans. IBR and invest vs pay off ASAP and invest later.

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  • $215,407 in student loans. IBR and invest vs pay off ASAP and invest later.

    Just graduated physical therapy school with $215,407 in debt at 36 years old. 2 consolidation, 3 graduate plus, 5 subsidized and 7 unsubsidized loans. Interest rate is around 6.5% average. I have $7,000 in an IRA.

    I begin working (ECS Specializing in nerve conduction velocity and EMG testing) in November with a starting salary of $60,000. I will work my way up over the next three years to around 120,000 and probably max out at $170,000-200,000 if I really hustle in 7-10 years. No employer 401k or HSA (I think I can still get one outside of work hopefully). My wife makes $40,000 with no 401k but she does have a HSA. We plan on having 1-2 kids within the next 3-4 years. She will cut back to part time with the same benefits or not work at all for until school starts. Give the rapid growth of my income PAYE or REPAYE month payment would be around $500-1500, which would roughly equal out what I would payback with the standard 10 year plan.

    Which plan seems better? Is there another plan I am not considering that would be better?

    1: With IDR I can (and will) invest heavily invest (max IRA, HSA, index or mutual funds).

    2: With the standard 10 year I would be very aggressive with all remaining budgeted money.

    3: I have thought about doing a Roth max of $12,000 for my wife and I, while doing the standard 10 year.

    4: Refinancing would sound better if I didn’t loss the protection of being disabled or passing away early that is provided with gov loans. But this is a possibility.

    PSLF is not an option, my job is not non-profit.


  • #2
    Have you checked to see what rate you could get if you refinance?

    With your ibr plan, do you mean that you will keep the loan for 25 years and have the balance forgiven at that point?

    Comment


    • #3
      Pay off loans immediately. Hustle. Live like a student for 5 years. Become debt free. THEN, live like you’re making 60k per year and invest heavily.
      good luck!

      Comment


      • #4
        IBR kinda blows. You are stuck with the loans a long time and still have to pay all the taxes on the forgiven at the end. It really should be an option of truly last resort. I would absolutely check with a loan advisor from the recommended page before going that route.

        If you have that kind of income potential I would just power through and live cheaply for now. I would not wait to have kids because there is way more to that then finances but I would consider keeping bother of you at work full time if you can swing it with childcare.

        Comment


        • #5
          Originally posted by kbjj View Post
          Just graduated physical therapy school with $215,407 in debt at 36 years old. 2 consolidation, 3 graduate plus, 5 subsidized and 7 unsubsidized loans. Interest rate is around 6.5% average. I have $7,000 in an IRA.

          I begin working (ECS Specializing in nerve conduction velocity and EMG testing) in November with a starting salary of $60,000. I will work my way up over the next three years to around 120,000 and probably max out at $170,000-200,000 if I really hustle in 7-10 years. No employer 401k or HSA (I think I can still get one outside of work hopefully). My wife makes $40,000 with no 401k but she does have a HSA. We plan on having 1-2 kids within the next 3-4 years. She will cut back to part time with the same benefits or not work at all for until school starts. Give the rapid growth of my income PAYE or REPAYE month payment would be around $500-1500, which would roughly equal out what I would payback with the standard 10 year plan.

          Which plan seems better? Is there another plan I am not considering that would be better?

          1: With IDR I can (and will) invest heavily invest (max IRA, HSA, index or mutual funds).

          2: With the standard 10 year I would be very aggressive with all remaining budgeted money.

          3: I have thought about doing a Roth max of $12,000 for my wife and I, while doing the standard 10 year.

          4: Refinancing would sound better if I didn’t loss the protection of being disabled or passing away early that is provided with gov loans. But this is a possibility.

          PSLF is not an option, my job is not non-profit.
          In my opinion there is no question here you need to pay off that debt asap. I feel for you though. It is going to be tough once you finally start working to finally see your first pay check and have to basically sign it over to a student loan company for the next 4-5+ years. But it’s very necessary. That debt will hang over your head until it’s gone. It wont feel any better having money invested at the same time. You need to imagine a scenario where you choose to invest everything that you could have thrown at loans and then a couple of years into it the market crashes and doesn't recover for the next 5 years or more. How would you feel seeing your investments tank by 50% meanwhile your loan balance stays the same? Then you’ll wish you had more cash flow to throw at more investments but you’ll realize you cant because you’re still paying so much interest on the massive student debt. Then there is the possibility that your job isn’t as secure as you imagined or that your income isn't as high as you expected. You’ll really wish you were debt free in those scenarios.
          Sorry to sound dramatic but you cannot let yourself be comfortable with $215K+ of high interest debt. That is a recipe for disaster.

          oh yeah another bit of advice from experience... if you already know you want kids, dont delay that. You’re 36, not sure how old your wife is but the earlier you start the easier it is on so many levels. Plus a lot of people wait until they’re almost too old and then find out they have fertility issues. At that point you’re lucky to have just 1. Something to consider

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          • #6
            I spoke with a good friend is a financial advisor. He definitely leaned towards paying them off. He suggested I could do a IDR for the first 3 years until my income rises and focus on getting a 6 month emergency fund while maxing a Roth IRA for us both. I would need to run the numbers but it appears REPAYE would keep the interest down if I went that route.

            Im learning towards doing the IDR, building a 6 month emergency fund and reassessing since we might have democratic politicians who could change things up in my favor. Unless they do something drastic I believe I will hit the loans hard via refi at hopefully ~3%. My credit is solid.

            Comment


            • #7
              Several of the student loan refinance companies have clauses that the debt will be forgiven in the event of death, similar to government loans. WCI has a write up on it

              https://www.whitecoatinvestor.com/wh...or-disability/

              Comment


              • #8
                Originally posted by Lordosis View Post
                IBR kinda blows. You are stuck with the loans a long time and still have to pay all the taxes on the forgiven at the end. It really should be an option of truly last resort. I would absolutely check with a loan advisor from the recommended page before going that route.

                If you have that kind of income potential I would just power through and live cheaply for now. I would not wait to have kids because there is way more to that then finances but I would consider keeping bother of you at work full time if you can swing it with childcare.
                You can avoid paying the tax bomb if you're considered insolvent at the end. Like you said, truly last resort.

                Comment


                • #9
                  paying off debt is generally intelligent behavior.

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                  • #10
                    Not to hijak but do PTs really make 200k?

                    Comment


                    • #11
                      Originally posted by Timparsons952 View Post
                      Not to hijak but do PTs really make 200k?
                      If you specialize and hustle doing EMG/NCV studies, I believe you can get there or close.

                      Comment


                      • #12
                        Your friend has reasonable suggestions. I'd max out retirement accounts (just IRAs, maybe traditional if deductible, and HSA), do IDR for now, then eventually refinance and crush the loans. Definitely don't refinance during these months of no interest, no payment. Re #4, that's what your life and LTD insurance policies are for.

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