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struggling with PSLF vs paying it off?

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  • struggling with PSLF vs paying it off?

    I have been struggling with making a decision about how to go about student loan payments

    I have around 270k of federal loans, currently at 0% interest thanks to COVID forbearance.

    I am graduating soon from residency and planning to work at a local county position that qualifies for PSLF. So far, I have been able to make 4 years of payment so far for PSLF from my residency.

    The dilemma I have is right now, thanks to alot of moonlighting over this year, I currently saved up around 100k after tax in my bank account.

    The question I have is...should I use that 100 grand and aggressively pay off my student loans? I could probably finish paying the rest of my loans after a year of working as an attending/contractor work.

    OR

    Should I use that money and invest it in the market/real estate and go for PSLF (qualifies after 6 more years)? If I go for PSLF, I will pay around 200k and have 70k forgiven with montly payments according to an online calculator.

    Thank you so so much in advance

  • #2
    Tough one.

    What bothers you more? Having loans hanging over your head for 6 years or knowing you could have had 70k forgiven?

    They are both great options.
    I would prob start with putting 100k - Emergency fund into PSLF side fund until I got my financial life squared away for few months and you see what happens with COVID relief and student loans. Currently 0$ payments that count towards PSLF is no brainer.
    Once you see what the plan for future/PSLF is for after September decide between a large PSLF side fund or fast pay down.
    Having a large PSLF side fund always gives you the option to switch into repayment. Refinacing is a forgiveness bridge that is burned...

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    • #3
      if you decide not to pay off the loan (I agree this is a tough decision given the facts) you should try to shield as much of that $100k you can from taxes (this will help keep your PAYE/REPAYE payments low). The way you do that is opening a personal 401k account by Dec 31 of this year and put ~$40k of it in there. Fortunately you can do this for the year after you've made the PSLF/pay off decision

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      • #4
        For me, it would depend on how confident you are that you will keep that job for 6 years. You don’t want to stay in a sucky job because you are tied to pslf.

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        • #5
          If $200K forgiven - go for PSLF

          If only a paltry $70K forgiven and you have to stick it ( or suck it) out for 6 years - just pay it off, be free and do whatever you want. Attending or fellowship or move to high paying PP or anything that catches your fancy without having a millstone around your neck.

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          • #6
            Keep the side fund in less risky investments, so it is not a millstone around the neck and you are ready for any potentially better job opportunities that dont provide pslf.
            “. . . And the LORD spake, saying “First shalt thou take out the Holy 401k. Then shalt thou save to 20%, no more, no less. 20% shall be the number thou shalt save, and the number of the saving shall be 20%. 25% shalt thou not save, neither save thou 15%, excepting that thou then proceed to 20%. 30% is right out . . .””

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            • #7
              Don't let $$$ drive our job decisions = burnout risk which is much more detrimental to finances than the PSLF/payoff decision directly. If you love your job and see no reason to doubt a 6 year further commit -- stick with PSLF; if you have doubts- pay down and get to broke (0 networth) sooner.

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              • #8
                If you pay for 6 years you'll have way more than 70k forgiven, assuming 6% interest.

                PSLF is always right financial decision, all else being equal - i.e. pick job first, student loan repayment plan second.

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                • #9
                  If you really want to crunch the numbers. You should look up how much total you would pay if you refinanced and payed off within 1-2 years. This will be over 270k.
                  Compare that number to how much you would pay for PSLF (you said ~200k), it will be more than 70k


                  Be disciplined and all that money you would have used to pay loans put into the market/retirement accounts and grow your wealth. If PSLF fails or you decide one day its not worth it just pay off loans lump sum.

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