licorice_whip Posted January 4, 2016 Share Posted January 4, 2016 Hello there. Long time lurker, but first post here. I just graduated PA school and I'm feeling extremely overwhelmed about how to tackle loan repayment. I met with a CPA in the small town that I live in, and he couldn't offer any advice for me since he doesn't have many college grads for clients. I'm hoping I can provide a little bit of my details and maybe someone could give me directions. I work for a 501c3 not for profit organization, and make $95k / year I owe $190k in tuition, all federal loans at 6.5% average My wife works for a 501c3 not for profit organization, and makes $45k / year She owes $100k in tuition, $50k of which is federal loans at 6.5% We have one child My initial thoughts were to consolidate my loans, apply for income-based repayment, and then apply for Public Service Loan Forgiveness. However, according to the calculator on the fed's website, it states that IBR would have me do 220 months, start at monthly payments of $1000, end at payments of $2000, of which I'd end up paying $330k total with zero dollars forgiven. I have no idea if this is a mistake in the calculation, or what... but needless to stay I'm feeling pretty bummed out about this. Can anyone provide any sort of recommendation about what they would do if they were in my shoes? I feel like between my wife and I, we'll be paying debt for the rest of our lives. :( In the meantime, I'm going to try to hunt down a different CPA, but would be sincerely grateful for any advice if anyone else is or has been in this situation. Link to comment Share on other sites More sharing options...
RuralER/Ortho Posted January 4, 2016 Share Posted January 4, 2016 Not sure if you made a typo, but I believe PSLF occurs after 120 "qualifying" payments, not 220. Link to comment Share on other sites More sharing options...
Boatswain2PA Posted January 4, 2016 Share Posted January 4, 2016 Live meagerly. I mean VERY meagerly. Shop for clothes and furniture at the DAV, drive 10 year old Hyundai's, eat at home, bring your lunch to work. Live VERY meagerly. Then throw EVERY PENNY YOU CAN at this debt. Build a budget where you are paying an EXTRA thousand dollars a month toward the principal on your debt. Don't go into debt for anything else, ever again ....except for a house. You can't afford another payment on anything. If you are in a high cost of living area, then move to a low cost of living area. Look especially at your housing costs. There are safe places you can live and practice where a nice, but small, house can cost you less than $60,000. My 22 year old son is putting in an offer on a 3bed/1 ba 1550 sq ft house on a corner lot in a good neighborhood for $51K. Imagine if your house payment was $540 a month.... Work extra shifts. Work a LOT of extra shifts. All extra income goes straight to the debt. For more comprehensive advice, go to www.daveramsey.com. His system is NOT a get-rich quick scheme, which is why it actually works. Your family has dug themselves into a huge hole, it's going to take a LOT of work and sacrifice for you to have a positive financial future for your kid(s). The good news is that you are making $140K a year. Pull weekend shifts in an urgent care and you can bump that to $165K or more. You'll lose $40K of that to the IRS. If you live like you only make $40K a year (there are LOTS of families that live on only $40K a year), that will leave $85K a year that you can pay toward your debt. You CAN be out of debt in 4-5 years, and then be able to build incredible wealth. Link to comment Share on other sites More sharing options...
GreyhoundGirl Posted January 4, 2016 Share Posted January 4, 2016 One thing to mention- where is says the "income based repayment" will go up to $2,000, that is based on, I believe, a 5% raise every year. Do the math and starting at 90k you would be making over 135k after 10 years. They just give those numbers as an estimate. With income based repayment, as long as it doesn't get changed, you pay 15% of your adjusted gross income. Link to comment Share on other sites More sharing options...
winterallsummer Posted January 4, 2016 Share Posted January 4, 2016 Bottom line: pay as you earn plan and simultaneously government loan forgiveness plan for non profit employees. Website calculator is not totally accurate. Link to comment Share on other sites More sharing options...
Evolute Posted January 5, 2016 Share Posted January 5, 2016 Have you looked into the National Health Service Corps (NHSC)? You agree to work in a health care shortage area for 2 years (it ends up being close to 3 years). The gov. pays you 50K and you have the option of extending for a year (or more) for an additional 35K. It should be noted however THIS IS NOT GUARANTIED MONEY. YOU HAVE TO APPLY. It is competitive and based on several factors including the site score.... the higher the site score the better the odds. Also, you have to have the job prior to applying AND your loans have to qualify. So be sure to due your due diligence prior to committing. Link to comment Share on other sites More sharing options...
Evolute Posted January 5, 2016 Share Posted January 5, 2016 I should have clarified. the gov. pays 50K toward your qualifying, outstanding student loans. Link to comment Share on other sites More sharing options...
Guest ttbrook Posted January 16, 2016 Share Posted January 16, 2016 I applied for the Pay as You Earn loan repayment plant...filed before I started my new job so I could enter $0 as my current income. I'm working for a not for profit hospital as well, planning on doing the loan forgiveness plan after 120 monthly payments. Right now I'm currently paying $31/month ( a joke I know), but these monthly payments of $31 qualifies for the 120 payments. When it's time for me to re-file, my husband and I will actually be filing taxes separately. He is a PA as well, and filing separately gives us much cheaper option on loan repayments vs filing together. You have to calculate the amount you save in taxes vs the amount in student loan money repayment you're saving. You can follow the advice of paying it off as quickly as possible (which was my initial thought), but when you do the calculations will actually end up paying less in the long wrong paying minimum payments doing the 120 month loan forgiveness. I would recommend looking at filing taxes separately, because that would probably make yours and your wife's monthly payments decrease as well. Link to comment Share on other sites More sharing options...
Boatswain2PA Posted January 17, 2016 Share Posted January 17, 2016 If the loan repayment program requires you to work at a given place for a set number of years, then you must look at that as a risk....what if you can't stand that location? What if it folds? What if your SP is corrupt, moves, or dies? What if spouse takes kids and bails. Most new grads change jobs in less than 3 years. Link to comment Share on other sites More sharing options...
lanime Posted January 17, 2016 Share Posted January 17, 2016 You can work at several different places... The employer(s) just have to meet the qualifications, which is typically to be a non-profit. There is a form online to keep track of your places of employment & have them sign/verify the dates as you go. Link to comment Share on other sites More sharing options...
Evolute Posted January 17, 2016 Share Posted January 17, 2016 If the loan repayment program requires you to work at a given place for a set number of years, then you must look at that as a risk....what if you can't stand that location? What if it folds? What if your SP is corrupt, moves, or dies? What if spouse takes kids and bails. Most new grads change jobs in less than 3 year What if you get hit by lighting and die, or worse live with a major disability? what if your spouse leaves you, or dies in an MVA? What if your kid crashes on his/her bicycle and needs extensive ortho surgery to fix the fx, or, god forbid they find a cancer? Those risks are there as well. does that mean you shouldn't go out side? get married? let your spouse drive/ride in a car? have kids, much less buy them a bicycle? My point is life is full of "what ifs" and risks. The only certainty in life is death. So to actually answer your question. there are many sites throughout the country that qualify. they can be found on the NHSC site along with the site scores. There is a system in place that allows the PA to change (transfer if you will) to another qualifying site, anywhere in the US. This allows for most of the things you mention above. The time commitment is set in stone. this is where its a bit shady IMHO, they say (the gov) that its a 2 year commitment. However one requirement is that you are employed at the site PRIOR to applying. AND the dead line to apply is (if memory serves) feb/march of each year. you will not find out if you get the money until sept/oct. AND the time commitment does not start until you get accepted. So it comes out to about 2 years and 10/11 month commitment. It can be longer thou, if you sign a contract to start say in April, and apply later that year you still won't know until sept/oct of the next year. So you just added 18 + months to your commitment. that's the best and worse case for time commitment (to the best of my knowledge). So, if you are granted the money (and accept) you're stuck and you just need to suck it up. Having said all that I have a close friend that worked in ED for 3 years then transitioned to FM at a CAH for the sole reason to get loan repayment. And, 4 years later the government has paid his entire PA loan debt. Anyway I'm not advocating for or against, I'm just putting the option out there. And please don't take my word for it. Check the NHSC web site for all the rules/regs. Link to comment Share on other sites More sharing options...
Boatswain2PA Posted January 17, 2016 Share Posted January 17, 2016 Health insuranfe, life insurance, and disability insurance mitigates those risks. I'm not telling anyone they should or should not do loan repayment programs. But I know several people who took jobs and moved, only to find out they did not get the program. I also know people who took jobs, moved, GOT the program, but quit/moved anyway because of various reasons. They wound up owing evenore money. It is a risk. It's okay to take risks in life, but you want to identify them. Link to comment Share on other sites More sharing options...
Evolute Posted January 17, 2016 Share Posted January 17, 2016 Health insuranfe, life insurance, and disability insurance mitigates those risks. I'm not telling anyone they should or should not do loan repayment programs. But I know several people who took jobs and moved, only to find out they did not get the program. I also know people who took jobs, moved, GOT the program, but quit/moved anyway because of various reasons. They wound up owing evenore money. It is a risk. It's okay to take risks in life, but you want to identify them. Boat, I agree. And I did not take your posts as advocating one way or the other. honestly I agree with your first post about living frugally and paying off the loans your self. I think that's the best option. I'm not advocating for or against the nhsc loan repayment option (or any other loan repayment option for that matter). I'm only putting the information out there so that others may make their own decision. I strongly suggest anyone considering this program (or any other) do their due diligence prior to making any commitment and decide for them selves. As far as people who "GOT the program, but quit/moved" and those who "took jobs and moved, only to find out they did not get the program". I would say they did not do their due diligence. For my part, in my above post I clearly stated this program was NOT guarantied and is competitive. I don't want to offend, but I can't help but to think these people you speak of did not do their due diligence. If they did do their due diligence then when they took the job they should have known they may not get loan repayment, thus should not be surprised. If they were in the program and "moved/quit" that's on them because they should have known their obligations to the program prior to entering into the agreement. Boat, with all due respect you are making it sound like its the programs fault. Its not. The program is what it is. I get that its a government web site which means it will be inherently twice as hard to navigate, but that doesn't absolve the applicant of the responsibility of due diligence. Link to comment Share on other sites More sharing options...
Mainer Posted January 17, 2016 Share Posted January 17, 2016 Agree, I'm almost in the same situation, I make 110k, wife makes 38k year, but have three children (unborn children count) I owe 200k Wife owes 30k 1. File taxes separately. You then only have to report your own income. (with IBR, My wife pays $14/month, and I paid about $400/month). 2. Negotiate with your employer a loan repayment "bonus". I ended up getting 7k year for 3 years, after taxes this was about 4k, which was paid directly to me, then I send in against the loan. My payment for about 10 months was $0 last year. However, I'm not sure how this worked for the PSLF (may have only counted as one payment towards the 10 years). This year I'll pay monthly just to make sure. 3. Work for a non-profit!!!!!!!!!!!!!!!! 4. Buy a cheap second home, or better yet, a small apartment building. You have a child. If you live separately from your spouse the last 6 months of each year and each of you maintains the cost of maintaining separate housing, this qualifies you as being single under the gov tax rules, even if you aren't formally separated or divorced. If you have a child, one of you can then claim HOH. If you have two children, you could each claim a child and both claim HOH. 5. Have lots of kids. Dependents lower your IBR payments. ***You can't afford not to pay yourself first. Put as much as you can (ideally the maximum) into pre-tax employer sponsored retirement plans and then a ROTH or Traditional IRA each year (depending on which works best for you. You can't afford not to do this.... ***also, it's also my understanding that if, god forbid, you were to pass away, federal loans are forgiven. this can be a comfort knowing you family won't be stuck with the burden of figuring out how to manage the dept. Link to comment Share on other sites More sharing options...
Boatswain2PA Posted January 17, 2016 Share Posted January 17, 2016 Ev - No arguments about due diligence; caveat emptor! I've been around long enough to know that free stuff usually isn't free....and free stuff like stu loan repayments, medicaid, and welfare isn't free either cause it comes at a great cost.For example, the OP says his family makes $140K/year, and owes $290K in student loans. What if, after 2 years and you have just started your obligated service, you are offered your dream job, in your dream location, with a pay of $130K/year? What if your wife finds her dream job, in that same dream location, with a pay of $80K/year? That's a $60K a year difference in pay ($40K after taxes), with dream job and dream locations. Now your in a position where you student loans have INCREASED to probably $335 thousand ($290K X 8% X 2 years) because you haven't paid on them in two years....makes it tougher to accept those dream jobs in those dream locations. That's a big price for student loan repayment. Link to comment Share on other sites More sharing options...
Boatswain2PA Posted January 17, 2016 Share Posted January 17, 2016 .....I'm almost in the same situation, I make 110k, wife makes 38k year, but have three children (unborn children count)..... 1. File taxes separately. You then only have to report your own income. (with IBR, My wife pays $14/month, and I paid about $400/month)...... 4. Buy a cheap second home, or better yet, a small apartment building. You have a child. If you live separately from your spouse the last 6 months of each year and each of you maintains the cost of maintaining separate housing, this qualifies you as being single under the gov tax rules, even if you aren't formally separated or divorced. If you have a child, one of you can then claim HOH. If you have two children, you could each claim a child and both claim HOH. 5. Have lots of kids. Dependents lower your IBR payments. ***You can't afford not to pay yourself first. Put as much as you can (ideally the maximum) into pre-tax employer sponsored retirement plans and then a ROTH or Traditional IRA each year (depending on which works best for you. You can't afford not to do this.... ***also, it's also my understanding that if, god forbid, you were to pass away, federal loans are forgiven. this can be a comfort knowing you family won't be stuck with the burden of figuring out how to manage the dept. Congrats on your new addition. 1. If you are only paying $414 a month then your student loan balance is going UP about $1100 a month, or $13K a year. 4. I dabble in real estate, and it can be very risky if you don't know what you're doing (I've been a landlord for 15 years and still learning every day what a PITA it is). It's easy to look at a house and say "we will clear XX amount of money on it!". It's also VERY easy to overestimate that amount. Houses are expensive. As to the tax advice....seems fishy to me claiming two HOH if you are actually living with your spouse. I wouldn't want to defend that in an audit. 5. Kids are even more expensive, especially if you make decent/good money because you won't qualify for the full child tax credit. I don't know about the ramifications for the loan repayment. Regarding RETIREMENT. FIRST - take advantage of any employer MATCHING 401K/403B plans up to the match. Don't use a non-matching plan first. SECOND - Max out ROTH IRA or ROTH 401K for you and spouse. You will pay tax on this money now, but it will grow tax free until retirement. This will make a HUGE difference at the end. THIRD - Non-matching 401K/403B plans Link to comment Share on other sites More sharing options...
Mainer Posted January 17, 2016 Share Posted January 17, 2016 Yes, more interest accrues on my student loans than I pay off. It doesn't matter. If you work for a non-profit (most healthcare jobs) and you make 120 payments, the entire loan is forgiven. Goal = pay as little as possible, the interest doesn't matter in the case. It's entirely legal to claim HOH if you are living separately the last 6 months of every year, even if you're married, as long as you maintain two different households. I don't personally do this, but I'm considering. Learned it from my dad who's both a CPA and tax attorney. Plenty of places to learn more about this loop hole on the net. https://ttlc.intuit.com/questions/2567672-can-a-married-person-claim-head-of-household-filing-status Before PA school, I owned a 4 unit apartment building, in a college town. I regret every day selling this building. It was an easy 20k income. I agree, if you're the type that sweats the little stuff, being a landlord may not be for you. Kids are expensive, but save you big time on your loans! Link to comment Share on other sites More sharing options...
loliz Posted January 17, 2016 Share Posted January 17, 2016 Better start saving for your taxes when(if) you get hundreds of thousands of dollars forgiven.... Link to comment Share on other sites More sharing options...
Mainer Posted January 17, 2016 Share Posted January 17, 2016 Actually, Currently, "loans forgiven through Public Service Loan Forgiveness and Student Loan Forgiveness for Teachers are exempt from being taxed." https://studentaid.ed.gov/sa/sites/default/files/public-service-loan-forgiveness-common-questions.pdf Unless my income dramatically increases, I'll pay less than 60k for both undergrad and graduate school. My wife is a teacher, pays $14/month. Has completed almost 90 on-time loan payments. Roughly 2.5 years left and she'll have 45k forgiven. Link to comment Share on other sites More sharing options...
loliz Posted January 17, 2016 Share Posted January 17, 2016 Well, that is very interesting. When I went to look at the loan forgiveness FAQ page to look at this, I did notice that there is no guarantee that the loan forgiveness will still exist in ten years and can be canceled anytime by Congress. Along with recent proposals to limit forgiveness to $57K, I am wondering if this concerns you? As much as loan forgiveness sounds great, the insecurity of it all scares me into just making the payment and getting it over with. I borrowed the money, lived on it, got an education-- the idea of paying it back doesn't actually seem ridiculous to me. edit to add: Not at all saying there is anything wrong with getting loans forgiven!! The eligibility should actually be easier in my opinion... especially with the ridiculous interest rates on student loans.. Just a clarification:) I'm just chicken to take the risk! Link to comment Share on other sites More sharing options...
Mainer Posted January 17, 2016 Share Posted January 17, 2016 Clearly, the political landscape seems quit volatile at the moment.... However, addressing what is perceived by economist as a "student loan crisis", "threatening national economic stability" and receiving bipartisan support, I would lean towards the more likely prospect that legislators will be looking to strengthen these measures.... "Possible Changes to the Current Tax Law In light of the grim prospect of paying a massive tax bill on your student loans, discussions about changing the current tax law have been held. Last year, US Representatives Mark Pocan and Frederica Wilson introduced the Relief for Underwater Student Borrowers Act. This act proposes to allow student loan borrowers in good standing with their repayment to become exempt from being taxed on their forgiven loans. Currently, only loans forgiven through Public Service Loan Forgiveness and Student Loan Forgiveness for Teachers are exempt from being taxed. Rep. Mark Pocan argues that the bill is important because it “closes a major gap in our tax code which penalizes some borrowers who have been granted debt relief after at least 20 years of consistent repayment towards their student loan debt.” Link to comment Share on other sites More sharing options...
Boatswain2PA Posted January 17, 2016 Share Posted January 17, 2016 Of course, shifting the cost of these student loans from the borrower to the government would do nothing to lessen our "national economic stability".Everyone who took out student loans knew how much they were borrowing, and what the interest rates would be. But yet you took them out anyway. Why do you expect taxpayers (that would be us!!) to pay for them?? We all have very good paying jobs, why don't we just pay our bills. Link to comment Share on other sites More sharing options...
Mainer Posted January 17, 2016 Share Posted January 17, 2016 Clearly people have different political opinions.... But conceptually, the theory is.....money needs to change hands among the American public for the economy to work If you aren't spending money relevant to your income, as a population, the economy takes a hit, the dollar loses value. The problem with gov loans has always been that you borrow from the gov and it goes directly back to the gov (at least until the inception of private institutions contracted to manage student loans) = no economic stimulus potential. Today's younger generations may very well be the first to make less than their parents did.... On top of that, they'll have more dept at a younger age (aka student loans) And won't be able to afford the same retail purchase, cars, ect May not be able to purchase a home at a reasonable age.... It's already doom and gloom for the housing industry.. To maintain the population, each couple needs to average a little over 2 children. The current average is about 1.8. A shrinking population has dire consequences on many levels, especially real estate.... It's simply a bone thrown at the middle working class people.....a minor shift from throwing welfare just to the poor and those making 300k and up.... Further, I consider myself a good investment to the gov.....I'm still paying the better part of 30k in taxes each year. Gov still wins..... Link to comment Share on other sites More sharing options...
cinntsp Posted January 17, 2016 Share Posted January 17, 2016 Of course, shifting the cost of these student loans from the borrower to the government would do nothing to lessen our "national economic stability". Everyone who took out student loans knew how much they were borrowing, and what the interest rates would be. But yet you took them out anyway. Why do you expect taxpayers (that would be us!!) to pay for them?? We all have very good paying jobs, why don't we just pay our bills. A bunch of 18-22 year olds don't know what they're getting into with student loans. I sure as heck didn't...so luckily I now make a lot as a PA. There should be regulations in place to prevent predatory lending practices(including with student loans) and programs to make it easier for folks to access higher education. Why on earth do federal student loans have interest rates as high as they are? Our country has backward practices in this area and others. Link to comment Share on other sites More sharing options...
Mainer Posted January 17, 2016 Share Posted January 17, 2016 "Everyone who took out student loans knew how much they were borrowing, and what the interest rates would be." In addition, some students new about income based loan repayment, loan forgiveness, national health service corps, ect. before they decided to pursue their education....not just loans and interest rates.... Link to comment Share on other sites More sharing options...
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