$325k Loans Help - Mistake in managing?, not doing IBR PAYE

[bobisnew]

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Hi all thanks for your help in advance.

I am a full time pharmacist at retail chain. I've been working for 2 years. Just got married during summer and started doing alot of research last few months her med school loans now. Wife is medical 1st yr resident. My goal is to pay off asap bc of high interest. But we want to live life at some point.

Loans were at $325k, I borrowed 125k from rents to pay loans at 8.6% (idk if this was the mistake). I thought I had no other choice in managing the rid high interest. So now we're at about 140k at 6.8%.

QUESTIONS: Idk if taking the money and paying off asap was best idea. Was not doing IBR PAYE is mistake? Should I keep dumping any extra money to clear out 140k. Should I go for IBR PAYE, would that negate the 125k i borrowed. From what I have researched for us, the best course is to pay as much as possible into diminishing loans. Also, i'll need to pay back rents + more. Just looking for advice.

Taxes: from my research filling jointly is best course of action. Also paid alot of interest so can hopefully recoup that.

Thanks

 

[type b pharmD]

Hi all thanks for your help in advance.

I am a full time pharmacist at retail chain. I've been working for 2 years, my debt is clear with alot of parents help from beg.. Just got married during summer and started doing alot of research last few months for her, our loans now. Wife is medical 1st yr resident, 3 yr residency. I hate bleeding money in interest so my goal was to pay off asap. But we want to live life at some point, specially her bc she works insane hours with little pay. MDs in NJ do not make as much as one thinks. Also we're 27, family and kids will come in near future.

Loans were at $325k, I borrowed 125k from rents to pay loan (they will need this in near future, i will also care for them as they work 80hr/wk for 25yrs to help their kids). I thought I had no other choice in managing the rid high interest. So now we're at about 140k.

QUESTIONS: Idk if taking the money and paying off asap was best idea. Was not doing IBR PAYE is mistake? Should I keep dumping any extra money to clear out 140k. Should I go for IBR PAYE, would that negate the 125k i borrowed. From what I have researched for us, the best course is to pay as much as possible into diminishing loans. Also, i'll need to pay back rents and care for them and siblings in future. Just looking for advice.

Taxes: from my research filling jointly is best course of action. Also paid alot of interest so can hopefully recoup that.

Thanks

Long story short: not doing ibr/paye at first was not a bad decision .. your potential downside is what if you could have skated along until govt forgives or student loan market crashes .. both not being something to bank on really.

Your best course of action will be to get on IBR/PAYE for your remaining loans.. reason: flexibility. You can still pay off aggressively when you want to, but youll have a huge safety net so you can pay back your family when you can.

Yes filing jointly is a win in 99% of situations. Claim the full interest deduction as well .. I think the family earnings cap is 160k at the top end of the current phaseout scheme.

Hth. Youre looking good. Do NOT kick yourself for paying back the one loan in full. That was a good choice. Your parents arent going to charge you 10% interest (I hope!) .. and now you can do ibr/paye on the other loans, you are getting some of the best of all worlds (hedging).

 

[BMBiology]

I would take two factors into consideration:

(1) After 20 or 25 years, your loans are not forgiven. You would need to pay income tax. So let's say you make 100 k in salary and 100 k is forgiven, expect to pay 200 k x 35% = 70 k in income tax.

(2) What you pay per month also depends on your wife salary and how much student loans she has. Right now is OK because she is still a resident. But since you are paying only the minimum per month under IBR/PAYE, expect more interest to be added to your principle.

That being said, I don't know how would can manage 330 k with 7% interest rate on a pharmacist salary. You are paying 23 k just in interest alone this year.

 

[Muse600]

pay it off asap...the total loan amount was not enough to take advantage of ibr, especially once your wife finishes residency and your combined income makes your ibr payment high anyways

 

[PumpkinSmasher]

That being said, I don't know how would can manage 330 k with 7% interest rate on a pharmacist salary. You are paying 23 k just in interest alone this year.

That is a lot to be spending but once your wife starts working it will be easier to make the payments. We have around 260k between pharmacy/medical school loans but between the two salaries, it really is not a problem. Just auto-pay and you will still have plenty left over for all other aspects of life: retirement, travel, mortgage, fun, etc. Depends on her specialty, but it will be fine.

 

[bobisnew]

I would take two factors into consideration:

(1) After 20 or 25 years, your loans are not forgiven. You would need to pay income tax. So let's say you make 100 k in salary and 100 k is forgiven, expect to pay 200 k x 35% = 70 k in income tax.

(2) What you pay per month also depends on your wife salary and how much student loans she has. Right now is OK because she is still a resident. But since you are paying only the minimum per month under IBR/PAYE, expect more interest to be added to your principle.

That being said, I don't know how would can manage 330 k with 7% interest rate on a pharmacist salary. You are paying 23 k just in interest alone this year.

Managing 330k. Originally, would have made min payment until wife makes full salary. Live meagerly for most of active life and pay back. I'm hoping my route was the best, and above post help alot! Paying back asap is best course of action from what I can understand.

 

[bobisnew]

Reassurance helps, appreciated.

 

[xiphoid2010]

Reassurance helps, appreciated.

Yeah, don't freak out. $325K might sound like a lot, but it's still falls within the rule of thumb that amounts be equal or less than a year's full income. When I was a PGY-1 resident I was on IBR, we lived in an 1 bedroom apartment and my residency pay was just enough for me to cough up the standard 10-yr repayment amount. Do IBR/PAYE for flexibility, live frugally and pay as much as you can afford, things will get a lot better in a hurry once she's done.

 

[bobisnew]

Thanks. We have stafford loans at about 140k now. (Paid lump some from before) They are stafford loans which are direct.

Can anyone enlighten me on IBR/PAYE? Besides flexibility, would i save any money? Ex. in IBR gov pays the extra interest x 3 yrs. But if I paid more (which I def. would), gov will not pay the interest accumulating. In essence this is only giving me more time. And IBR will work if we file taxes separately only bc my income would either not qualify us or make payments same/higher.

 

[SoylentGreen]

IBR is worth it just to get the government to pay the interest on subsidized loans. If you pay extra it will go to interest first, but if you put it all towards one loan it will go to principal next, so you can focus on the highest-interest loan and pay off mostly principal. I was on IBR and for 2 years the payment was nearly $0, since it was based on my non-existent income as a student for the first year and half a year's pay for the second, and in that time I paid off my grad plus loans, which had the highest interest rates.

 

[bobisnew]

Thanks soylentgreen.

From what I have gotten now, pay off whatever you can afford. Money in the bank (aside from emergency funds) is not doing any good. Whether you invest it, or use it to pay off loans you'll still save alot in long run. Also, for deductions there are limits when you married it sucks. I paid off a ton in interest (see above) but combined income if married caps at 155k MAGI (total without most deductions). Rph salary + resident might make you go above. I picked up alot of extra shifts and may have screwed myself.

from google
"If you are married but file separately, neither can claim a deduction for student loan interest.
Remember if you file married filing jointly, that your deduction is reduced if your modified adjusted gross income is between $125,000 and $155,000, and eliminated if your modified adjusted gross income is more than $155,000."

 

[68quebec]

What should I do? Husband (just got married) is in medical school. He has like 150k now. we were planning on taking a few loans out since school is 50k. Should I pay a little bit on his loans now or just wait? Mine are all paid off.

I can deduct the interest for his loans up to the 2500...

once he finishes his residency and fellowship, he can easily pay off the loan within short period of time. (especially if he falls into surgery specialty ;p )

 

[knight on horse]

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