Best way to pay off loans

[JasonDrake]

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I'm looking for the most optimal way to pay back my student loans.

Background:
I'm about to finish residency after four years. I will have $55,000 in federal stafford loans from undergraduate, which I have never paid on, they are in deferment. I have another $10,000 in Perkins undergraduate loans. Then I have about $200,000 in private loans from medical school, which I deferred for three years, and now they are in forebearance.
I have a spouse and 3 children, spouse does not work as she stays at home caring for the children. She may work as a teacher after I'm done with residency next year.
She has $22,000 in undergraduate federal loans, also in deferment. So all together, I have about $287,000 in educational loans to pay back, not counting interest that is capitalizing.

I had considered IBR before, but we are basically pay check to pay check with our current bills. We are living frugally now, paying other bills, so paying on loans isn't feasible right now.
I will likely earn about $150,000 to $200,000 next year as an attending physician. I have no retirement at this point. I do have a $500,000 life insurance policy so that should I die, the loans can get paid off. I plan on making sure I have disability insurance all the time as I do now.
I need to get things in order.

After reading about IBR, PAYCE, PFSL, and so on I am thorougly confused and don't even really know where to start. I'm considering just living like a (slightly better off) resident for the next five years and just paying as aggressively as I can on the higher interest private loans with a plan to pay off everything in 10 years. I plan to start saving for retirement, too. Not sure how I'll do that other than 401K or something.
In 10 years I will be 50, and my oldest child will be ready for college. He'll either have scholarships or go to a state school. I do plan on buying an average, modest house, probably a $200K mortgage next year if possible. Maybe replace our 2 used cars with newer used cars, as will be necessary in the next couple of years.

Is there a better way to pay off the loans? Should I sign up for some program 9 months from graduation? I sort of feel like a failure about the situation.
Thanks

 

[deleted480308]

You need ibr set at your residency salary, if she has to work for that to happen...she needs to

 

[JasonDrake]

You need ibr set at your residency salary, if she has to work for that to happen...she needs to

Thanks for your reply.

Well, if I understand correctly IBR is based on your Adjusted Gross Income from filed federal income taxes. Wouldn't it work to wait until I promote to attending to do IBR in July 2014, as the last federally reported income would be on my residency salary?

My spouse working during this last year in residency just isn't an option; she has looked for a job in her field but they just aren't available, and local child care would pretty much eat up a minimum wage income and exhaust her. I don't think that would help us much for the next 9 months.

Anyway, I'm not even sure if IBR is the way to go? It would only cover the federal loans.

 

[freaker]

Have you looked into the NHSC loan repayment program? I'd strongly consider it given your debt burden, which I don't need to tell you is pretty substantial for your expected earnings. My guess is that you're going into a field that would qualify, as well, looking at your salary (primary care, psychiatry). You're basically reimbursed 30k per year for a 2-year minimum for working in an underserved area. That's 30k per year tax free, I'd add. You can keep earning that money as long as you work at a qualifying site. You'll be working with primarily medicaid patients if you go this route and will be in a smaller community.

There are some really harsh penalties from renegging on a contract with them, so read the fine print, but if you were to camp out in an underserved area and make it home, you could have the federal government pay off 150k of your loans over a five-year period and all the while be living in a low-cost-of-living area.

You can get IBR only on the Stafford loans (and then the Perkins loans once you consolidate them through Direct Loans). I don't think it's going to be of much use to you, though given 1) they won't consider your private loans in determining your minimum payments and 2) your income will be high enough where they'll expect you to make the full payment on just a 65k loan. The only real benefit I could possibly foresee to IBR is that your interest wouldn't capitalize on the 65k for roughly the first year if you consolidate your loans and apply for IBR. After that, you're making full payments and paying down the interest, anyway, so I don't think it would be of any help at all.

 

[JasonDrake]

Have you looked into the NHSC loan repayment program? I'd strongly consider it given your debt burden, which I don't need to tell you is pretty substantial for your expected earnings. My guess is that you're going into a field that would qualify, as well, looking at your salary (primary care, psychiatry). You're basically reimbursed 30k per year for a 2-year minimum for working in an underserved area. That's 30k per year tax free, I'd add. You can keep earning that money as long as you work at a qualifying site. You'll be working with primarily medicaid patients if you go this route and will be in a smaller community.

There are some really harsh penalties from renegging on a contract with them, so read the fine print, but if you were to camp out in an underserved area and make it home, you could have the federal government pay off 150k of your loans over a five-year period and all the while be living in a low-cost-of-living area.

You can get IBR only on the Stafford loans (and then the Perkins loans once you consolidate them through Direct Loans). I don't think it's going to be of much use to you, though given 1) they won't consider your private loans in determining your minimum payments and 2) your income will be high enough where they'll expect you to make the full payment on just a 65k loan. The only real benefit I could possibly foresee to IBR is that your interest wouldn't capitalize on the 65k for roughly the first year if you consolidate your loans and apply for IBR. After that, you're making full payments and paying down the interest, anyway, so I don't think it would be of any help at all.

Yes, I am looking at NHSC. From what people say, I should be careful not to get over-worked and underpaid, to avoid quitting and getting penalized, but that it is good to ask about if I find a reasonable position. I wouldn't mind working in a smaller city or town, where a lot of these positions seem to be. Don't mind living a relatively humble life style as we do in residency.

I just want to get these loans paid off before I get too old or sick to put my kids through college.