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boli

PSLF vs Paying off loans ASAP

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I'm looking for some perspectives on what people recommend as far as loan repayment goes after school. When I graduate in 2020 I will have ~175k in loans from school (undergrad and out-of-state PA) and my wife has her own 100k from her professional program. We are both eligible to  participate in "Public Service Loan Forgiveness" wherein you make 120 qualifying payments (10 years) and the remaining balance is forgiven. This is what my wife has been doing for several years but I've heard some horror stories about end of term application for loan forgiveness where the Gov said "whoops, sorry doesn't count, keep paying". Has anyone here applied and gotten PSLF? 

I see our two main options as:

1) living as though the loans will be forgiven after 10 years and making the minimum payments. This severely hurts our DTI ratio for home buying and other things on the front end but there's a chance to have 10s of thousands forgiven later. Also gives us the opportunity to invest our excess cash instead of paying it to loans at 4-7% interest. 

2) Living off 1/2 our take home salary (estimating take home around 150k for the family total) in a modest home for 5-7 years and aggressively paying back the loans to a zero balance. This would make us essentially debt free by age 40 but severely limits our options on the front end for investing, home buying and childcare options.

Any insight from current PAs who are in the loan payment hell? TIA

Edited by boli
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I never had to deal with loan repayment but as someone planning his last several years before retirement I can promise you that being debt free is a huge part of having a quality life and (someday) retirement.

Good luck!

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I can only speak for myself here, but I did not pursue PSLF, and am trying to aggressively pay off debt as best I can. I had a similar amount of debt as you, as well as a wife and 2 children. On a single income, we are aiming to have loans paid off in 5-7 years (currently on a 10 year loan repayment plan). My personal opinion is that banking on the loan forgiveness after 10 years is a huge gamble and one that might cause a lot of heartache and grief down the road. I prefer to do things in a manner where I have control over my finances. 

Becoming debt free as quickly as possible is my goal. While sure, it's difficult to buy that big nice house or newer cars, living frugally (yet still comfortably) has been very achievable for my family. 

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4 hours ago, brooks23 said:

I can only speak for myself here, but I did not pursue PSLF, and am trying to aggressively pay off debt as best I can. I had a similar amount of debt as you, as well as a wife and 2 children. On a single income, we are aiming to have loans paid off in 5-7 years (currently on a 10 year loan repayment plan). My personal opinion is that banking on the loan forgiveness after 10 years is a huge gamble and one that might cause a lot of heartache and grief down the road. I prefer to do things in a manner where I have control over my finances. 

Becoming debt free as quickly as possible is my goal. While sure, it's difficult to buy that big nice house or newer cars, living frugally (yet still comfortably) has been very achievable for my family. 

this was basically exactly what I was going to say...but I will add:

If you are truly able to put $75k toward student loans annually, then just consider putting that toward your retirement rather than increasing your spending.  Just imagine (or actually go calculate) how rapidly you will build a solid nest egg.  Plus there are two questions for preparing for retirement: 1. how much do you spend?, 2. how much have you saved?  The less you spend, the more rapid you can get to the point of replacing your income with your investments.

Edited by mgriffiths

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I've looked into PSLF pretty extensively.  They are VERY strict about payments which is why a fair percent of people who are coming due for their 10 year forgiveness are finding out that they have not yet made their 120 payments and must keep paying.  If you pursue this route you must make sure you follow the rules to the T; know them front and back.

I also worry that in 10 years a LOT can change both for me and for the government.  Do I want to be limited to jobs that will allow me to keep doing PSLF?  Will the govt still be honoring the agreement?  If not, do borrowers have any legal recourse for ensuring the govt keeps up their end of the deal?

For me, who has about the same amount of debt as you, I opted to go standard payment route with the intention of contributing to my work retirement plan enough to get the employer match and putting all extra income towards loans.  It's not glamorous and I would rather be saving for an early retirement, but I fear the unknown of what may or may not happen in 10 years more.  At least this way there is some predictability.

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I attempted PSLF for my undergraduate loans (government-based EMS).  They are very strict and the payments were SOOO very expensive.  Basically, you are paying off the loan in 10 years and saving what amounts to the interest at the end of it.   There was a point in my life that I could not longer afford the payments and had to default on the program.  Of course, I make a lot less as a medic than a PA does but I only had about 40K in loans and still couldn't make it work.  I'm now on an income-based repayment program and it's much more manageable.   

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Also in loan re-payment hell and pursuing PSLF. My thoughts are to consolidate under Fedloan, as they are the ones who verify your payments for the forgiveness. Might as well not mess with an outside loan service and all that (i.e great lakes or navient). If the PSLF does screw us after 10 years, there is always the 20 or 25 year IBR forgiveness (not excited about that). IBR is at 10% of discretionary income, so it's not an incredibly high monthly payment on a PA salary ($560 or so every month). Additionally, you can deduct interest paid on loans, so during those 10 years there is at least that. I am applying for loans to buy a home in a couple of weeks; I'll update you on how it goes if you remind me via message.

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I’m in PSLF. It’s great for military since a lot of income is tax free and doesn’t count toward payments in the discretionary income calculation. I have heard nightmares, but many of these are from borrowers who have not completed the requirements because they were ill informed at the beginning. Only one person have I heard of publicly having problems claiming to have done verythinf perfectly. 

I consolidated under fed and have worked for only government institutions, and plan to until I finish, so there can be no argument about qualifying employers or payments.

I would have preferred not to, but due to this being a second master’s for me with >200k debt and a one income family with plans for residency, I honestly didn’t even see it as a choice.

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Thanks for all the insight and replies. It helps that we are anticipating moving to a lower cost of living area after I complete school. I think if I go the PSLF route it will be important to find ways to reduce my taxable income and really minimize the discretionary income like LT, d-wade and others have suggested (hello 403B contributions). I appreciate the help!

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22 minutes ago, Photograph51 said:

CNBC headline from September, 2018:

"Just 96 of 30,000 people who applied for public service loan forgiveness actually got it"

So, no.

Good grief, that is just sad.

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avoid the PSLF

 

just live tight, get a second job, bank money - think about it - you can earn 50k extra in a year and pay off 100k in two years....

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On 1/4/2019 at 1:23 PM, Photograph51 said:

CNBC headline from September, 2018:

"Just 96 of 30,000 people who applied for public service loan forgiveness actually got it"

So, no.

Because those 29,900 others did not have enough payments or they did not qualify based on the type of loans they had. It's

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Everyone's financial situation is different, but I had a similar level of debt as you and chose the PSLF route. Reasons being I did not get a head start on loan repayment (was a PA for almost 4 years before starting PSLF), and I calculated that by the time I paid my loans off the aggressive way I would have spent MUCH more money than waiting for PSLF, it would take just as long, plus PSLF would allow me invest more upfront and gain an advantage in compound interest. 10 years is a long time.

The payments are not small, however, so find ways to reduce your taxable income. They will count your spouse's income whether you are married filing jointly or not. 

Make sure if you commit to PSLF you are dotting your i's and crossing your t's. Read and re-read the criteria. Make CERTAIN your employer is a 501(c)3 or govt agency. Consolidate under fed. Send in that PSLF certification form twice a year, in duplicate, keep copies, and review your loan servicer's response letter to you for errors.

Edited by BruceBanner
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On 1/7/2019 at 1:15 AM, SamthePA said:

Because those 29,900 others did not have enough payments or they did not qualify based on the type of loans they had. It's

The anticipation from the incompleteness of this sentence is killing me buddy

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I had about $212,000 in debt when I graduated in 2016. I have been working for about 2.5 years and have been able to cut that debt down to $87,000. I had looked in to the program, but I don't plan on being in debt for 10 years. There are tons of behaviors you can change and opportunities that will come up as a PA that will allow you to get the debt down. Find a job with loan repayment. Work hard, take on over time or a per diem and never see a penny of the OT, make it go right to the loans. Cash out PTO if offered. Go out to eat less. Live on less than you make. You'll be surprised how quickly you can melt any amount of debt. 

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Editing this post: consolidating loans is the way to go to convert non-direct loans, but it does reset the clock.

Be careful consolidating under fed serv. If you have even one non-direct loan that gets lumped in, you’re screwed. Non-direct loans include a lot more than you’d think (Strafford, Perkins, etc). Only 0.3% of people who applied for forgiveness after making their 120 payments have actualky had it granted for various loopholes like this.

Edited by Hopeful2015

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8 hours ago, Hopeful2015 said:

Be careful consolidating under fed serv. If you have even one non-direct loan that gets lumped in, you’re screwed. Non-direct loans include a lot more than you’d think (Strafford, Perkins, etc). Only 0.3% of people who applied for forgiveness after making their 120 payments have actualky had it granted for various loopholes like this.

You can turn FFEL's into direct loans I believe.

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8 hours ago, Hopeful2015 said:

Be careful consolidating under fed serv. If you have even one non-direct loan that gets lumped in, you’re screwed. Non-direct loans include a lot more than you’d think (Strafford, Perkins, etc). Only 0.3% of people who applied for forgiveness after making their 120 payments have actualky had it granted for various loopholes like this.

this is incorrect, at least legally. I'm sure Betsy Devos is doing everything she can to keep from paying out.

https://studentloansherpa.com/ffel-consolidation-loan-forgiveness/

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Boli - 3rd option is to work like mad, live like paupers, and have the mess cleaned up in 4 years.

Just got an email about a primary care job starting at >$220k a year.  It's in a terrible neighborhood (Kabul), but that means its tax free!

10 years of debt is the worse thing imaginable.

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31 minutes ago, Cideous said:

Kabul?  Like Afghanistan?  

 

lol

Yup.  I'm gonna look at it.  With the tax benefits, one year there puts me two years closer to retirement.

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