Resident income + 6fig income - how to pay

[cascadia]

I am in a sort of unusual situation.

I am a resident and have $80k of Federal student loans. I have 3 years of residency.

My wife is in business and makes approx $160k per year. She also has some student loans (approx $100k, re-fied thru CommonBond a few years ago).

 

I am having trouble selecting the best repayment plan. We don't qualify for IBR d/t her salary. Some have suggested PAYE since it doesn't take into acct your spouse's salary if you file taxes separately, yet you lose the marriage deductions if you file separately.

 

We are both eager to repay our loans ASAP, so I don't want to defer payment at the expense of accrued interest.

[DMFA]

Re: MFS vs MFJ, generally not optimal with disparate incomes since the higher income will be taxed disproportionately at a higher bracket.  So you're right about that.  There are a few deductions and credits that you miss out on.

Honestly, since you only have $80k - might seem like a lot to you, but in the realm of med school debts, that's less than half of average - you might do well just to pay it, especially with your wife's very good income.

I'm guessing you're at about 6.8%.  So assuming you make $55k, your joint income is $215k. Feel free to provide actual figures.  So, based on that:

• Monthly interest accrual: $453.33


• Calculated 10-yr standard payment : $920.64


• RePAYE calculated payment (AGI - 1.5pov)/120 = $1,588.67 (so prob not worth it)


• MFJ/PAYE nor MFJ/IBR: you wouldn't qualify since you don't have a partial financial hardship (calc'd pmt in each > 10-yr std payment)


• MFS/PAYE calculated payment (same eq as above, but just yours) = $255.33 (less than interest, so again suboptimal)

Seems to me like you should just pay it.  Refinance your wife's loans to the lowest possible rate/term you can afford, then refinance yours.  Unfortunately as a resident, you probably won't get good rates (prob somewhere in the 4s), but I assure you they're likely far better than the criminal rates charged by the Dept of Ed.

 

[adventure]

DMFA wrote:

Seems to me like you should just pay it.  Refinance your wife’s loans to the lowest possible rate/term you can afford, then refinance yours.  Unfortunately as a resident, you probably won’t get good rates (prob somewhere in the 4s), but I assure you they’re likely far better than the criminal rates charged by the Dept of Ed.

Click to expand...

That what we are doing...

[DaBears38]

This is a great question and one we have been researching as well! Our facts: household income 140k/yr (around 50k/yr as I start my 4 residency and wife makes around 90k/yr), my fed loans of 82k at 5.6% and our credit score of 800+. The goal was to pay off the loans ASAP as well, probably around 5 years, with extra payments each month during residency and finishing off the rest during that first year as an attending. I attempted to refinance with DRB and they gave us an offer with 5 years fixed rate at 5.40% and 4.90% variable a couple of weeks ago. I was not surprised, but I also was not thrilled. I didn't think it was worth it to refi for that small of a difference. At this point we will probably go with the standard 10-year repayment plan and make extra payments each month while watching the rates with the possibility of refi down the road. Y'all may very well get a better rate than us, but the resident label seems to carry with it a rate of around 5.0%, as WCI and many others have pointed out. Best of luck and would love to hear what y'all end up deciding!

[lilsnappa]

My wife & I are/were in a similar situation. Our income was $200k/yr when she started residency ($150k for me and $50k for her). She had right at $130k in federal students upon graduation.

We refinanced through SOFI (using the WCI bonus offer   ) at the end of the grace period. We both agreed to commit to getting it paid off asap, so we refi'd to a 5yr term and received a rate at 3.5%. We refinanced the loan with both of our names on it to 1) get the lowest rate, and 2) to show that we are both committed to financial independence.

We're about 18 months into now and we're aggressively paying it down, basically using her entire income (after maxing out retirement/HSA accounts) towards the loans.

Can't wait to be done and have all the cash freed up to start creating some wealth.