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Hi all,
First of all, I'm sorry in advance for the long(ish) post and I really appreciate your advice!
I'm a first year EM resident and my fiancé is a 4th year medical student also applying to EM. I've managed to graduate with no loans (combination of having some savings from working before medical school plus living frugally during and then about halfway through starting to receive some trust money that I've put entirely toward my education and frugal living so far), but my fiancé will be graduating with about 200k. I don't think that she'll be doing a fellowship or working at a 501c organization after graduation (not that many where I think we'll end up), so I doubt she'll actually be able to go through PSLF. Her loans are all direct stafford loans and mostly have interest rates between 5.4-6.8%; about $8,000 (divided between two) are subsidized while the rest are unsubsidized.
I currently have enough coming through from the trust that I'm living pretty frugally on that while applying almost my entire yearly salary towards retirement accounts (I'm at a UC program so we have a solid 403b, 457b, DCP (7.5% pretax toward pretax in place of SS), and the ability to contribute aftertax to the DCP and then immediately roll over to a Roth IRA plus my standard Roth IRA contribution). I know how very fortunate I am to be able to do that, and I'm trying to take advantage of it rather than squander it away on the Tesla I really want
That said, we're now trying to figure out the best way to go about paying off her loans and using REPAYE vs refinancing. On the one hand, we'd still qualify for REPAYE if she uses the same all-into-retirement-accounts plan that I'm using now (AGI is about $1,000 monthly after all the pre-tax reductions), and I think if she matches close by (here's hoping), our household expenses wouldn't increase so much that we'd need to spend more than my current spending...minus the loans, of course. We would probably occasionally have more income anyway to put toward her loans on top of the base monthly payment of REPAYE (especially after I start moonlighting during my third year), which leads to one of my first questions -- is it possible to direct that extra payment towards principal specifically, or would it primarily go toward the extra accumulating interest? I've found a bunch of conflicting articles about this so I'm not entirely sure. Similarly, is it possible to direct the extra payments toward her UNsubsidized loans only since the few remaining subsidized ones will continue to have interest paid by the government during REPAYE as will half of the unsubsidized ones? Does the interest forgiveness happen right away or only at the end of the 10 or 20 years?
Are there circumstances where you think using a loan refinancing option like DRB or SoFi would be better? I was leaning toward REPAYE because she does still have some that are subsidized and would therefore not accrue interest during residency (right? unless that has changed and I didn't realize it), but since she's not doing PSLF, do you think DRB or SoFI or another would be a better option since it could lower the interest rates? If so, is it possible with these companies to direct extra loan payments specifically toward principal rather than interest?
And lastly, would there be a strong argument for reducing the amount of money we're planning to put toward retirement accounts in order to pay off loans earlier instead? That's certainly an option, but I have to admit that I love seeing my retirement fund grow each year and knowing how long it has to compound since we're both still pretty young and have a long road ahead of us.
Thank you for reading through and for any advice you might have. I've been doing a lot of research into it but keep going back and forth, and I really appreciate your taking the time to help.
First of all, I'm sorry in advance for the long(ish) post and I really appreciate your advice!
I'm a first year EM resident and my fiancé is a 4th year medical student also applying to EM. I've managed to graduate with no loans (combination of having some savings from working before medical school plus living frugally during and then about halfway through starting to receive some trust money that I've put entirely toward my education and frugal living so far), but my fiancé will be graduating with about 200k. I don't think that she'll be doing a fellowship or working at a 501c organization after graduation (not that many where I think we'll end up), so I doubt she'll actually be able to go through PSLF. Her loans are all direct stafford loans and mostly have interest rates between 5.4-6.8%; about $8,000 (divided between two) are subsidized while the rest are unsubsidized.
I currently have enough coming through from the trust that I'm living pretty frugally on that while applying almost my entire yearly salary towards retirement accounts (I'm at a UC program so we have a solid 403b, 457b, DCP (7.5% pretax toward pretax in place of SS), and the ability to contribute aftertax to the DCP and then immediately roll over to a Roth IRA plus my standard Roth IRA contribution). I know how very fortunate I am to be able to do that, and I'm trying to take advantage of it rather than squander it away on the Tesla I really want
That said, we're now trying to figure out the best way to go about paying off her loans and using REPAYE vs refinancing. On the one hand, we'd still qualify for REPAYE if she uses the same all-into-retirement-accounts plan that I'm using now (AGI is about $1,000 monthly after all the pre-tax reductions), and I think if she matches close by (here's hoping), our household expenses wouldn't increase so much that we'd need to spend more than my current spending...minus the loans, of course. We would probably occasionally have more income anyway to put toward her loans on top of the base monthly payment of REPAYE (especially after I start moonlighting during my third year), which leads to one of my first questions -- is it possible to direct that extra payment towards principal specifically, or would it primarily go toward the extra accumulating interest? I've found a bunch of conflicting articles about this so I'm not entirely sure. Similarly, is it possible to direct the extra payments toward her UNsubsidized loans only since the few remaining subsidized ones will continue to have interest paid by the government during REPAYE as will half of the unsubsidized ones? Does the interest forgiveness happen right away or only at the end of the 10 or 20 years?
Are there circumstances where you think using a loan refinancing option like DRB or SoFi would be better? I was leaning toward REPAYE because she does still have some that are subsidized and would therefore not accrue interest during residency (right? unless that has changed and I didn't realize it), but since she's not doing PSLF, do you think DRB or SoFI or another would be a better option since it could lower the interest rates? If so, is it possible with these companies to direct extra loan payments specifically toward principal rather than interest?
And lastly, would there be a strong argument for reducing the amount of money we're planning to put toward retirement accounts in order to pay off loans earlier instead? That's certainly an option, but I have to admit that I love seeing my retirement fund grow each year and knowing how long it has to compound since we're both still pretty young and have a long road ahead of us.
Thank you for reading through and for any advice you might have. I've been doing a lot of research into it but keep going back and forth, and I really appreciate your taking the time to help.
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