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What would you do in my situation? PSLF?


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#1 truepat76

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Posted 10 March 2017 - 09:51 PM

Hi everyone, I know this isn't a personal finance forum but I'm just hoping to get some opinions here:

 

Recent PA school grad with $130,000 in federal loans (PA school + undergrad)

Will be making ~$115,000 once I start working in a few months 

 

My s/o makes ~$40,000 and is still in school. Their total debt will be ~80,000 and will go into repayment next summer 2018. 

 

Our living situation - currently we are fortunate to be living low rent (300/month) with family - but this won't last for long. We have about 1-1.5 years left here and then will need to move out. We're hoping to purchase a house or condo. Currently unmarried and unengaged (due to financial reasons with me being unemployed while in school...) (this is another expense I need to plan for)

 

My dilemma is whether or not to pursue PSLF or to stick with the standard plan. My payments would be ~$800/month under the REPAYE plan, $1,500/month under the standard plan. My job now will qualify for PSLF, but I'm cautious about the uncertainty of the program (being capped, cancelled, disqualifying hospital-based jobs, me eventually finding a better job that doesn't qualify, etc). However, i think it would be tight trying to manage a mortgage on our incomes while both paying loans under the 10 yr standard plan (leaving us with little wiggle room each month). Starter homes in my area go for $250-$315K. We both have good credit scores (750+)

 

I've heard many different opinions - go for PSLF, just stick to the standard 10 year, try to pay off the loans sooner while living in the low-rent situation (I could do this for about 1 year, but that would affect our savings for a down payment on a home). It's a bit overwhelming and just wondering what others would do. 

Thanks



#2 Boatswain2PA

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Posted 12 March 2017 - 05:20 PM

Option 1:  PSLF - continue being in debt for 10 years and locked to specific jobs.

 

Option 2:  Standard repayment plan...continue being in debt for years and years while you buy a "starter home" that you would struggle to build equity in because you're making minimum payments.  Oh, and you gotta maintain that starter home, and you gotta fill it with things, etc, etc, etc.....

 

Option 3:  Continue living like you are students for another 4 years, pay off every nickle of debt you have in those four years.  Then live like a student for another 1-2 years while you save up a large down payment.  $120K down, with absolutely no other debt, and you can buy a $500K home instead.

You're going to be $210K in debt ($130 + $80) making $145K a year.  $45K for Uncle Sam, $40K to live on, $60K toward debt.  You're out of debt in less than 4 years.

 

8 year plan with option 1:  You're still in debt, working a job you may not want.

 

8 year plan with Option 2:  You're still in debt, living in your starter home.

 

8 year plan with Option 3:  You're out of debt, living in a $500K home.


 


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#3 Lyndhurst

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Posted 13 March 2017 - 01:56 AM

Just had a very similar conversation with my wife this weekend. 

 

PSLF looks tempting but there is just too much risk involved. Politicians could change the rules or a job may not qualify. Ultimately I dont want to feel restricted in my career opportunities because I'm holding out for relief. Also I just dont feel comfortable relying on the largesse of the government.

 

I'd sooner take control and just go all out to try and clear our debt as fast as we can. This means living on the same budget we have been on for the past two years, holding off on replacing our vehicles, plus working as much overtime as I can. The plan is to be completely debt free in four years. 

 

At that point well we can start to make real plans on how we want to live , what career opportunities we want to pursue...maybe even replace my car (but probably not, its a Subaru so it is not broken in properly till you get to 500,000 miles!)


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#4 truepat76

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Posted 13 March 2017 - 11:25 AM

Thank you both. Agreed that PSLF is a huge gamble and locks you into certain jobs. Obviously it would be best if we could stay in the low-rent situation for as long as possible while nailing our loans quickly. Unfortunately we won't be able to stay here for too much longer as mentioned. Since my SO is still in school and loans are in deferment currently - I'm thinking of spending the next year nailing my loans as much as possible (say 5K+/month) to at least put a dent into it. Then once my s/o starts working at a higher paying job (with new degree) we can start saving up for a home. Once in said "home" we'd throw any extra $$ towards loans. Smart idea? Foolish?

 

A financial advisor I met with made it seem as if despite the massive debt, we'd have no problem getting a starter home in the price range I listed and paying our mortgage, bills, and 10-year loan plan without an issue. However, I think we'd have a lot less "wiggle room" financially and as Boatswain mentioned - homes have a lot more financial burden besides the mortgage.

 

Lyndhurst - if you don't mind me asking, what's your current living situation?



#5 Lyndhurst

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Posted 13 March 2017 - 03:08 PM

Currently im staying with family while I finish up rotations. My wife is renting a place near her parents. Next year our plan is to continue living there. The house is not in the best shape but it is owned by family friends and the rent is cheap. Also it is across a field from her parents so easy access to baby sitting and family support while I am away.

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#6 greenmood

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Posted 18 March 2017 - 08:08 PM

You can do both, you know.

 

I'm on PSLF but pay buttloads of extra money towards debt every single month. I should be done with all of our household debt (mine + his) in five years. PSLF is my backup. If something happens and I get off track with extra payments, I can still pay the minimum every month and might have something to forgive in 7 years. There is no rule with PSLF that you can only pay the minimum.

 

If you're smart you'll forget about buying a home until you're debt-free. When you own your house, you have to maintain it and that costs a lot of (often unexpected) money.


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