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How to best use familial support to pay back loans

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  • How to best use familial support to pay back loans

    Hello all, have lurked on the site and reddit page for a few months now. I am seeking some advice on how to best handle paying off my loans. My family is willing and able to help me pay off them off, but I am trying to figure out the best strategy to minimize the amount I pay. First, I want to recognize that I am very thankful and fortunate to have familial support on this as I know the vast majority are paying on their own. For some general information on my situation, I have about 152,000 principal, that has accrued about 10,000 of interest. I took out loans for portion of tuition and interest accrual is now frozen until October (I believe). The options I am weighing are between paying off my loans as soon as I can in full later this year vs going for PSLF. I will be in residency for 5 years and have interest in going into academics, which is why I am considering PSLF. Using some of the online calculators and playing with excel, I have been trying to figure out which would save the most money. Granted, I am making some assumptions and estimates about salary and AGI to calculate what my payments would be. What I am comparing is the total amount I would have paid over the 120 payments versus what I would pay if I immediately paid it off. I think if I made the lowest possible payments (0 the first year using medical school salary, and low payments for first year as an attending using resident salary tax return and switching to PAYE before becoming an attending) it would total to about 120,000 paid with the remaining forgiven. This was result in saving about 40,000 dollars total. However, the downside of this plan would be some of the stress of being in debt and making payments, another thing to keep track of to make sure qualifying payments, and most importantly, interest accruing raising the total significantly and the chance I do not land a PSLF legible attending position. For paying it off right away, my concerns are paying more than I would if I got forgiveness and also the off chance if Biden forgives any portion of student loans. I have no clue how likely it is, but for example if 50,000 were forgiven across the board (the upper end of what some senators are pushing for) it would offset the 40,000 savings of PSLF. In that scenario, I would definitely pay it off with my familial support.

    Of note, my dad (who is a very aggressive investor) also suggested me investing the money that we have that could pay off my loans, assuming a conservative gain of 8% would outpace the rate of interest (around 6%) and then if I dont qualify for PSLF I could just use that money to pay off (however I am not sure after taxes that would be enough).

    Does anyone have any thoughts or advice regarding this? I am leaning towards consolidating and beginning payments through REPAYE at least for this year and re-evaluating, but I am not sure if there is something I am missing. I appreciate any input!


  • #2
    You're still a long ways from understanding what kind of practice you'd ultimate like to do.

    Also, a gain of 8% is not a conservative number. In general, if my choice was between paying off my student loans and investing the money, I'd pay off my student loans.

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    • #3
      The best was to pay off loans is having someone else do it for you , either parents , government or our fearless leader.

      I would probably not wait on the later, especially due to income limits and nothing has been passed into law.

      I do not know much about the repay system, but it seems like a good pathway, but it might restrict you career pathway , if you choose to go in a different direction.

      If your family is willing to pay off you loans, I think this would make the most sense. But I would structure a deal to pay them back with interest, which is more of a win / win for both parties involved. However, financial transactions between family members tend to be one of the biggest problems creating animosity and poor relationships. But only you know you situation

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      • #4
        is your family paying off your loans so that it's a loan to you, or is this a gift? if it's a loan, then I might be hesitant, but if it's a gift you should take it.

        there are too many moving parts to consider PSLF in my view. If you family is generous, I would take that help and get rid of those loans ASAP and take them to a thank-you dinner (assuming this is a gift). I agree with Cord that 8% gains is not at all conservative....4% is conservative. And inflation of 6% is too high...you are probably wrapped up in the current environment of "high" inflation but until the past 6 months, for that past 10-20 years, the average inflation rate was around 2.5%.

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        • #5
          It isn't a loan from family. When I asked my parents why they would be willing to do so, they said its our culture and is a gift. And that some of this money would be mine eventually so it would be worth it to reduce burden/interest now. It generally aligns with how my family has handled money and relationships my whole life. It is also generally assumed and part of my plan to support them in needs as they get older and also paying it forward to support my children.

          I agree, the uncertainty of career goals and job availability is what concerns me about PSLF. Calculating it out, if I do not end up forgiven, I could end up paying significantly more than I would have initially (About 65-75K more). It would be paying about 120K if forgiven, about 160K if I pay in full as soon as I can with family contribution, and about 230K total with interest if I end up not getting PSLF and then refinancing to pay off. I feel like I am leaning towards consolidating and starting making low payments now (which would take 1-2 months) to be eligible for PSLF, and then once October comes and interests starts accruing again (I believe if I consolidate now it stays 0%), assessing where the government is at. If it seems any loan forgiveness would be possible or imminent, then maybe hold off, and if the far more likely scenario of nothing going on that would benefit, then just pay off by the end of year in full.

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          • #6
            Originally posted by Random1 View Post
            The best was to pay off loans is having someone else do it for you , either parents , government or our fearless leader.

            I would probably not wait on the later, especially due to income limits and nothing has been passed into law.

            I do not know much about the repay system, but it seems like a good pathway, but it might restrict you career pathway , if you choose to go in a different direction.

            If your family is willing to pay off you loans, I think this would make the most sense. But I would structure a deal to pay them back with interest, which is more of a win / win for both parties involved. However, financial transactions between family members tend to be one of the biggest problems creating animosity and poor relationships. But only you know you situation
            To be clear, the government and our senile leader don’t pay anything off. They force other Americans to pay it off, either now or in the future. Carry on.

            Comment


            • #7
              Originally posted by ENT Doc View Post

              To be clear, the government and our senile leader don’t pay anything off. They force other Americans to pay it off, either now or in the future. Carry on.
              I always like to remind folks that every tax deduction you take is paid for by other Americans! But since you, un-senile ENT, don't take any govt assistance, it's okay to stay as high on that moral horse as you've always been.

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              • #8
                Originally posted by East coast View Post

                I always like to remind folks that every tax deduction you take is paid for by other Americans! But since you, un-senile ENT, don't take any govt assistance, it's okay to stay as high on that moral horse as you've always been.
                Perhaps you missed my many lucid posts where I have called for elimination of deductions and credits. Carry on.

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                • #9
                  Ok, guys, I love you both, but let’s squelch the politics.
                  Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                  • #10
                    Originally posted by LearningFromNumbers View Post
                    It isn't a loan from family. When I asked my parents why they would be willing to do so, they said its our culture and is a gift. And that some of this money would be mine eventually so it would be worth it to reduce burden/interest now. It generally aligns with how my family has handled money and relationships my whole life. It is also generally assumed and part of my plan to support them in needs as they get older and also paying it forward to support my children.

                    I agree, the uncertainty of career goals and job availability is what concerns me about PSLF. Calculating it out, if I do not end up forgiven, I could end up paying significantly more than I would have initially (About 65-75K more). It would be paying about 120K if forgiven, about 160K if I pay in full as soon as I can with family contribution, and about 230K total with interest if I end up not getting PSLF and then refinancing to pay off. I feel like I am leaning towards consolidating and starting making low payments now (which would take 1-2 months) to be eligible for PSLF, and then once October comes and interests starts accruing again (I believe if I consolidate now it stays 0%), assessing where the government is at. If it seems any loan forgiveness would be possible or imminent, then maybe hold off, and if the far more likely scenario of nothing going on that would benefit, then just pay off by the end of year in full.
                    You are in a unique scenario where you have money to pay off your loans now. Most others who are going for PSLF, don't have the option to just pay them off immediately and need to make the small payments for the foreseeable future.

                    Stick with your plan until payments and interest resume. Then pay them off and get them behind you so you can focus on:
                    -Career
                    -Family
                    -Retirement savings
                    -Leisure
                    (not in this particular order)
                    Helping student loan borrowers manage their student loans. StudentLoanAdvice.com. [email protected]

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