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Tricky PSLF question/calculation

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  • Tricky PSLF question/calculation

    Hoping for some help in what I think is not an easy calculation here . . .

    Current direct fed loan standings 6 years out of med school (5.5 of them completed at a non profit with repayment counting towards PSLF, graduating fellowship going to be attending next year):

    Current Principal $227k

    Current Interest $17k

    Total $244k

    Rate of interest 6.8%

     

    So here is where the question comes in, got married 1.5 years ago and filed taxes jointly this time around so I previously had IBR that was $450 per month, however because of increased joint income this IBR payment is going to jump to $1,040 monthly.  Was discussing with Fed Loan Servicing that I could switch to "revised pay as earn" payment plan which would decreased my payments to $740 per month, however would have to consolidate interest into principal to do this, thus changing all of my current loans into principal.  Note: starting 14 months from now when Fed loans calculate my attending salary I will have to pay $2,200/month from June 2018 until January 2022 when I hopefully will be forgiven (I think that is 3.5 years of full $2,200 payments).

    Is this worth it? Please and thank you!

     

  • #2
    You've only got a short amount of time left. If you switch to RePAYE, then you may have to recertify income, meaning higher payment sooner.

    It p much doesn't matter what capitalizes and what doesn't if you're not paying it anyway (e.g. forgiven).

    You only have 4.5 years left. If you don't have a partial financial hardship anymore (calc'd payment > 10-yr standard amount), then you can't move into (but can stay in) IBR or PAYE, but should be able to do RePAYE as long as there are no Parents' PLUS loans in there. If you stay in IBR, it's 15% of DI capped at 10-yr std, while RePAYE is 10% of DI with no cap...So IBR may end up being less than RePAYE in the future, and you won't be able to get back into IBR.

    I wouldn't advise filing taxes separately unless you have a similar income to your spouse; the higher income will have a much higher tax burden.

    That short term of PSLF payments means that it should be superior to refinance based on total paid over the remaining life of the loan, so do whatever gives you the lowest average monthly payment until forgiveness.

    I will say that it appears the Trump administration seems to had PSLF in its crosshairs, but it's tough to imagine they'd leave people already in it for so long without it.

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