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Please help! Refinance VS PSLF

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  • Please help! Refinance VS PSLF

    Hi, I'm new to reading white coat investor and am still learning the basics. I am wondering what peoples thoughts are on my situation. I currently owe 300k at 6.8% interest. I have been in income based repayment in the past. As long as my employer qualifies for the PSLF program, all of my loans qualify for this program. I have made 39 qualifying payments towards the 120 payments if I chose to enter the program.

     

    My question is: Would it be better to enter the PSLF program and pay for about 7 more years (I was told by the representative at Navient that after that the amount forgiven is not taxable income) OR is it better to refinance at a lower rate while living frugally and throwing all our extra income at the debt?

     

    Is there a big risk of the PSLF losing funding and then I would be stuck with more debt which piled up as I payed the minimum IBR payment?

     

    I have been out of residency for 7 months. My wife and I are single income and have worked our debt down to just our house and my student loans.

     

    Any input or suggestions/information is appreciated!

  • #2
    I'd at least take a look at what kind of rates would be offered via refinance before making any final decision. The answer may be different depending on what the providers offer rate-wise.

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    • #3
      These kind of questions just illustrate the strangeness of the system. I understand you're not supposed to refinance if you want the ibr/pslf/repay(e) or whatever. However, this results with current rates that the ultimate price tag for all involved/taxpayers is higher than necessary. Seems strange and the opposite of what all would want, but I guess since they are the creditor/payor they dont really care about the rate as much. Oh well.

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      • #4
        I graduated medical school with 283k in loans.  They ballooned to around 330k when I started my fourth year of residency this past July.  I ended up refinancing with DRB.  I have a few more years of training to go (six years total of residency/fellowship).  I could easily obtain a job that meets the requirements for PSLF after fellowship, but I didn't want to risk having my loans shoot up to 500k+ by the time I'd cash in, only to potentially find out that I'm not eligible due to some technicality, or due to the program going away for some reason.  I didn't want to be consumed with worries about A) whether the program will still exist in several years, B) how I'd repay my loans if the program did not exist, C) whether I was meeting every single requirement to get repayment.

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        • #5




          My question is: Would it be better to enter the PSLF program and pay for about 7 more years (I was told by the representative at Navient that after that the amount forgiven is not taxable income) OR is it better to refinance at a lower rate while living frugally and throwing all our extra income at the debt?
          Click to expand...


          FWIW--nothing in the promissary note indicates that the amount forgiven is NOT taxable income. It doesn't say for PSLF, IBR, PAYE, or I assume REPAY. But I'm pretty sure forgiveness under IBR and PAYE is considered taxable income, so I'm anticipating them doing that with PSLF as well. Bottom line is since no one has applied for forgiveness yet, we don't know how the system will work.

          They also don't spell out what an 'eligible' employer is, IIRC. Just that you have to be employed by one. And a lot of academic positions where you work in a non-profit hospital are not actually paid by a non-profit entity, and thus a lot of academic positions don't currently qualify for the program.

          I'm not sure the best answer to your question. I'm currently in PAYE and will stay in PAYE through the end of my fellowship (so will have 6.5 years of payments under the plan), and then will consider refinancing depending on my job prospects. But I anticipate being able to pay down my loans within 5 years of finishing fellowship regardless of whether or not PSLF is still around when that happens.

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          • #6
            Forgiveness under PSLF is NOT TAXABLE. However, keep in mind, that you must be working for a Non-Profit. If you take a job working as an independent contractor, this would not qualify. If you take a job working for a for profit group that staffs a hospital (so all of your time is spent in the hospital but you don't work for the non-profit) does not qualify.

            Your decisions are all predicated on many moving parts and you need a good understanding of how your loans are comprised and which one(s) would or would not qualify for PSLF.

            Jan Miller did a talk for a group of Emergency Medicine Physicians that I was part of and he was excellent and his information was extremely well-received. He and I have no financial relationship. I know he offers a free 30-minute consultation and can answer some of your questions. After that, if you want him to work on your behalf you can always hire him. Otherwise, your 30-minutes with him were very well spent.

            You can go to his website and sign up on his calendar and he will call you at that time. His website is www.student-loan-consultant.com

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            • #7
              Larry, independent contractors can be eligible for PSLF. They are eligible as long as the organization that hired them is a non-profit.

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              • #8
                Yes, that is correct. The example that I used was working as an independent contractor for a for profit company (at least that's what I had in my head when I typed it). As I read it, I probably should have been more clear.

                Thank You!

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