REPAYE, PAYE, IBR, or Refinance?

[AZAttorney11]

Hello! I'm trying to help a family member figure out the best possible approach to managing his students loans. Below are the relevant facts:

• Total loan balance, including interest, is $161,000. Of that amount, $4,000 is a Perkins Loan, and the remaining amount is made up entirely of Direct Subsidized and Direct Unsubsidized Loans. No private loans of any kind.


• Family member wants to be a pediatrician and is starting residency at a top 3-5 program next month.


• Family member may want to do a fellowship after his residency is complete.


• Family member's first year resident income is roughly $55,000.

What's the best approach to managing this situation? If family member was going into a highly-paid field of medicine, this would be a different issue, but his heart is in pediatrics. Family member is not keen on having student loans for 20 years, but doesn't want to be in a position where interest accrues more than the minimum payment due (he doesn't want to finish residency with the loan amount greater than $161,000).

Any thoughts? Thank you!

 

 

 

[Peds]

he needs to pick one of the repayment options, either repaye or IBR likely is best.

if he does fellowship, he will only need 4 more years post training to complete forgiveness (assuming it still exists).

if he doesnt, he can refinance at that time and go whole hog paying them off.

unfortunately not a huge potential for moonlighting during residency for peds, but every little bit can count.

tell them do not buy a house....

 

[ENT Doc]

And tell them to be very cautious about pursuing a fellowship.  Many Peds fellowships put you in a worse financial position.  But if they think it's worth the sacrifice to do something they're incredibly passionate about then so be it.  Just be aware of the numbers.

[DMFA]

AZAttorney11 wrote:

Hello! I’m trying to help a family member figure out the best possible approach to managing his students loans. Below are the relevant facts:

• Total loan balance, including interest, is $161,000. Of that amount, $4,000 is a Perkins Loan, and the remaining amount is made up entirely of Direct Subsidized and Direct Unsubsidized Loans. No private loans of any kind.


• Family member wants to be a pediatrician and is starting residency at a top 3-5 program next month.


• Family member may want to do a fellowship after his residency is complete.


• Family member’s first year resident income is roughly $55,000.

What’s the best approach to managing this situation? If family member was going into a highly-paid field of medicine, this would be a different issue, but his heart is in pediatrics. Family member is not keen on having student loans for 20 years, but doesn’t want to be in a position where interest accrues more than the minimum payment due (he doesn’t want to finish residency with the loan amount greater than $161,000).

Any thoughts? Thank you!

Click to expand...

Is he married?  Even if so, RePAYE is probably best.  Combo of lowest monthly payment and least interest accrued thanks to the 50% unpaid interest subsidy.  This halves the interest if his payment is $0 (which still counts for payments if he's considering PSLF).

RePAYE always includes spouse's income, which would result in a possibly higher payment than IBR.  With PAYE and IBR one can file separately in order to have a lower monthly payment, but this is usually not the best decision since it likely will increase the overall tax burden (esp with disparate incomes) and make him ineligible for several deductions and credits, as well as direct Roth IRA contributions (but could still "backdoor").