Federal loan repayment options. Which one did you choose?

[danicuhmae]

Advertisement - Members don't see this ad

Hi guys.

Just recently became a pharmacist and OVERWHELMED with the amount of federal debt I owe. Currently it's ~310k (including undergrad). I have two options in my head that I am considering. One is completely sane and justifiable while the other allows a more luxurious lifestyle/opportunities for investments. As you can tell by my definitions for each, I might be leaning towards the latter.

The first is aggressively paying off my debt - just throw in as much as I can with whatever I have left at the end of the month. Yeah, that's great and all but I would be doing this for about 10 years and this is NOT at all appealing to me. My mindset is hinged on what's happening now and I am always thinking of not knowing whether today would be my last (I know, grim. Happy Halloween!). I've had a few near-death experiences and they have obviously affected the way I think.

The second is, if you are aware of the current repayment options, picking "PAYE" and paying 10% of my salary towards loans while using the remainder for 401k/Roth IRA/stocks/a horse/whatever. I understand that after the 20 year repayment term, the remaining that would be forgiven would be considered TAXABLE INCOME. I used a calculator online and the amount forgiven would be about ~430k after 20 years. Who knows what the income tax will be 20 years from now, but currently, under Trump taxes, it would be about $167k, so I'm guessing it would be around that ballpark, give or take 20k? ...Or it could be even more, who knows. I'm considering paying it off with whatever I make from selling a house that I'll be buying in the near future IF that housing market goes up. Obviously being able to pay off the tax on the forgiven amount is based on a lot of "if's" - IF I make money through investing, IF I make money from selling a house, IF I marry a multimillionaire - but the thought of not worrying about money throughout my 20 years of life is sort of enticing. I don't know. I've seen people literally throw out their backs and wear back braces for years from working too hard. I don't want to be that.

Anyway, let me know what your plan is, thought process, income/debt amount. Anything is appreciated. Thanks.

TLDR;
What is your experience or plan with paying off debt? Any good sites/calculators to help choose a path? Please be specific with how you paid off or will pay off debt.

 

[VictorOfHungerGames]

Hi guys.

Just recently became a pharmacist and OVERWHELMED with the amount of federal debt I owe. Currently it's ~310k (including undergrad). I have two options in my head that I am considering. One is completely sane and justifiable while the other allows a more luxurious lifestyle/opportunities for investments. As you can tell by my definitions for each, I might be leaning towards the latter.

The first is aggressively paying off my debt - just throw in as much as I can with whatever I have left at the end of the month. Yeah, that's great and all but I would be doing this for about 10 years and this is NOT at all appealing to me. My mindset is hinged on what's happening now and I am always thinking of not knowing whether today would be my last (I know, grim. Happy Halloween!). I've had a few near-death experiences and they have obviously affected the way I think.

The second is, if you are aware of the current repayment options, picking "PAYE" and paying 10% of my salary towards loans while using the remainder for 401k/Roth IRA/stocks/a horse/whatever. I understand that after the 20 year repayment term, the remaining that would be forgiven would be considered TAXABLE INCOME. I used a calculator online and the amount forgiven would be about ~430k after 20 years. Who knows what the income tax will be 20 years from now, but currently, under Trump taxes, it would be about $167k, so I'm guessing it would be around that ballpark, give or take 20k? ...Or it could be even more, who knows. I'm considering paying it off with whatever I make from selling a house that I'll be buying in the near future IF that housing market goes up. Obviously being able to pay off the tax on the forgiven amount is based on a lot of "if's" - IF I make money through investing, IF I make money from selling a house, IF I marry a multimillionaire - but the thought of not worrying about money throughout my 20 years of life is sort of enticing. I don't know. I've seen people literally throw out their backs and wear back braces for years from working too hard. I don't want to be that.

Anyway, let me know what your plan is, thought process, income/debt amount. Anything is appreciated. Thanks.

TLDR;
What is your experience or plan with paying off debt? Any good sites/calculators to help choose a path? Please be specific with how you paid off or will pay off debt.

All my finance friends are telling me to pay as small as you possibly can and keep your money. Invest elsewhere. Like you said, buy a house then sell it off when you retire. Just don't spend it on wasteful assets like cars lol

 

[BC_89]

I personally can’t stand having a high debt over my head hoping that REPAYE sticks around. In a recent thread, I posted references of how PSLF is already on the table for being revoked after being put into play under Obama in October 2007...I posted another of how REPAYE/IBR may be pending the same fate.

Financially, I’d at least make the match in my 401k...If I knew 100% surety that REPAYE would stick around, I’d stretch it out and invest my money elsewhere..For being over 300k+ in debt though, I don’t trust it’ll be around that long...Could you imagine if they pulled the rug from under you and your 300k+ Loan ballooned for 20-25 years??

Food for thought

 

[VictorOfHungerGames]

I personally can’t stand having a high debt over my head hoping that REPAYE sticks around. In a recent thread, I posted references of how PSLF is already on the table for being revoked after being put into play under Obama in October 2007...I posted another of how REPAYE/IBR may be pending the same fate.

Financially, I’d at least make the match in my 401k...If I knew 100% surety that REPAYE would stick around, I’d stretch it out and invest my money elsewhere..For being over 300k+ in debt though, I don’t trust it’ll be around that long...Could you imagine if they pulled the rug from under you and your 300k+ Loan ballooned for 20-25 years??

Food for thought

Not sure if they can pull the plug on PAYE people in the middle of their repayment. I can see how they can get rid of that option for people who haven't started paying for their loans. But if that happens, I would assume less people would be interested in borrowing money in the first place... and that can't be good for business...

 

[PumpkinSmasher]

3600/mo to pay it all off in 10 years. That is going to be over half of your net monthly take home.

I personally would be afraid to take the chance of the loan forgiveness going away or being unable to handle the tax bill in 20 years.

My opinion: pay off the loan in 10 years while still having enough to invest in 401k and live life. It wont be extravagant but doable. You chose to borrow the money, so pay it back and don't bet on a taxpayer bailout. Just my 2 cents

 

[BC_89]

Not sure if they can pull the plug on PAYE people in the middle of their repayment. I can see how they can get rid of that option for people who haven't started paying for their loans. But if that happens, I would assume less people would be interested in borrowing money in the first place... and that can't be good for business...

People will always be grandfathered in once they have started, but turns out its all in the underlying writing in the form of “excuses” on the part of the program and not at the fault of the now-working-student. PSLF is being seen already as getting dragged out in court and all it’s wonderment for thousands of qualifying people.

In the end though, that 310k is enough to make me worry...I can only imagine tax brackets going higher than future COL for the difference getting forgiven...

 

[PharmDBro2017]

Can you get a non-profit gig and do PSLF-PAYE/REPAYE... then it's forgiven after 10 years with zero tax bomb? I would try to find a non profit gig.

 

[Adsum]

The answer to your question comes down to your risk tolerance. Owing $310,000 in student loans puts you in a precarious financial position. With that much debt, I would not feel comfortable adding additional risk by heavily investing in real estate/stocks (except 401k/roth).

Ask yourself, what is the worst that could happen if you aggressively pay down your student loans? What is the worst that could happen if you don’t pay them and invest that money? Which of those outcomes do you want the least?

 

[Cleaveland]

Hi guys.

Just recently became a pharmacist and OVERWHELMED with the amount of federal debt I owe. Currently it's ~310k (including undergrad). I have two options in my head that I am considering. One is completely sane and justifiable while the other allows a more luxurious lifestyle/opportunities for investments. As you can tell by my definitions for each, I might be leaning towards the latter.

The first is aggressively paying off my debt - just throw in as much as I can with whatever I have left at the end of the month. Yeah, that's great and all but I would be doing this for about 10 years and this is NOT at all appealing to me. My mindset is hinged on what's happening now and I am always thinking of not knowing whether today would be my last (I know, grim. Happy Halloween!). I've had a few near-death experiences and they have obviously affected the way I think.

The second is, if you are aware of the current repayment options, picking "PAYE" and paying 10% of my salary towards loans while using the remainder for 401k/Roth IRA/stocks/a horse/whatever. I understand that after the 20 year repayment term, the remaining that would be forgiven would be considered TAXABLE INCOME. I used a calculator online and the amount forgiven would be about ~430k after 20 years. Who knows what the income tax will be 20 years from now, but currently, under Trump taxes, it would be about $167k, so I'm guessing it would be around that ballpark, give or take 20k? ...Or it could be even more, who knows. I'm considering paying it off with whatever I make from selling a house that I'll be buying in the near future IF that housing market goes up. Obviously being able to pay off the tax on the forgiven amount is based on a lot of "if's" - IF I make money through investing, IF I make money from selling a house, IF I marry a multimillionaire - but the thought of not worrying about money throughout my 20 years of life is sort of enticing. I don't know. I've seen people literally throw out their backs and wear back braces for years from working too hard. I don't want to be that.

Anyway, let me know what your plan is, thought process, income/debt amount. Anything is appreciated. Thanks.

TLDR;
What is your experience or plan with paying off debt? Any good sites/calculators to help choose a path? Please be specific with how you paid off or will pay off debt.

I'll probably just do the 10 year repayment plan through my borrower. Investing 401K on whatever my company matches. Still driving the same car I've been using since high school. (until it breaks down) Living like a poor college student for now and hoping for the best 🙂

 

[Gombrich12]

I would go on REPAYE or PSLF if possible. It's going to be very hard to pay down $300,000 in debt over 10 years with the likelihood of layoffs and declining salary. It's the government's problem that they loaned you that much money, don't stress out over it. Make sure you're saving a lot of your money and enjoy life with the rest.

 

[babybull]

isn't pharmacy on shaky ground? what if you lose your job while trying to aggressively pay off $310,000+ in student loans? that would totally derail everything and is a more likely scenario than the government pulling the plug on these payment programs while you're in the middle of it.

with that much student loan debt, do yourself a favor and enroll in paye/repaye. grow your retirement, buy a place to live, enjoy a night out with your significant other, occasionally treat your parents to a nice dinner, LIVE. the debt burden students face today is worse than it was even 10 years ago so some on this board don't quite grasp the severity of the situation.

i am currently on repaye and i know several rphs who were trying to aggressively pay off their loans now expressing regret that they attempted to do that in the first place.

 

[TerryTerry]

Good job security for next 10 years or more = pay ASAP

Otherwise, pay minimum.

 

[deleted205891]

Try to find a federal job with EDRP or whatever its equivalent is at other agencies. It's up to $200k now (was only up to $60k when I got it). It's tiered so you may not get the full amount, but will likely still get a substantial amount, and it's tax-free!

 

[radio frequency]

BC_89: How was Obama involved in PSLF in 2007 when he didn’t take office until 2009?

 

[BC_89]

BC_89: How was Obama involved in PSLF in 2007 when he didn’t take office until 2009?

College Cost Reduction and Access Act was put in effect October 2007 and revamped by Obama with contingencies in ‘09 (yes I see my mistake). The proposal to cap it was shutdown in ‘09 and in 2015.

Point is, these loan forgiveness plans have a way to be modified and/or tossed out in the near future.

 

[jjcayce123]

Try to find a non-profit to get the 10 year loan forgiveness. Most hospitals are non-profit and qualify. As others have said the 10 year forgiveness may not last but if you are going to be paying anyways you might as well do it and hope that it sticks. I am on PAYE and my first year of the 10 I only paid like $10 a month b/c it is based on what you earned the previous year (I was a P4 and only made like 8k that year). So I was able to knock out 12 of the 120 payments by only paying $10 a month

 

[BC_89]

isn't pharmacy on shaky ground? what if you lose your job while trying to aggressively pay off $310,000+ in student loans? that would totally derail everything and is a more likely scenario than the government pulling the plug on these payment programs while you're in the middle of it.

with that much student loan debt, do yourself a favor and enroll in paye/repaye. grow your retirement, buy a place to live, enjoy a night out with your significant other, occasionally treat your parents to a nice dinner, LIVE. the debt burden students face today is worse than it was even 10 years ago so some on this board don't quite grasp the severity of the situation.

i am currently on repaye and i know several rphs who were trying to aggressively pay off their loans now expressing regret that they attempted to do that in the first place.

I have yet to meet one person who regretted getting out of debt early.

You can still meet the match in a 401k, aggressively get out of debt, then invest more than the match and still be ahead of most Americans. I don’t trust the government to follow through on my forgiveness 20+ years down the road.

Yes, 310k+ in student debt is beyond me but....papers were signed and this shouldn’t have been a surprise...If they had to just work at a 503(c) company for 10 years under PSLF at least that’s faster than 20-25 years.....pick your poison

 

[jjcayce123]

Find out what your current interest is that you owe. Pay that in one lump sum. The last thing you want to do is pay interest on interest

 

[BMBiology]

BC_89: How was Obama involved in PSLF in 2007 when he didn’t take office until 2009?

Obama made it even more generous. Before it was 15% for 25 years then it became 10% for 20 years under Obama. This further incentivized universities to jack up tuition and to expand, and incentivized students to borrow more money.

The results:

(1) Because of student loan debt has gone thru the roof, taxpayers will end up paying for this debt.

(2) Students are chained to their debt. They are having a difficult time buying a house because their debt to income ratio is too high which hurts the overall economy.

(3) Contributed to the pharmacy saturation which affects every pharmacist.

It is not just Obama policy but there was a major push to provide access to higher education for everyone. Every student, including a 2.0 GPA student, got the opportunity to borrow up the nose and attend a fancy college.


Sent from my iPhone using SDN mobile

 

[BC_89]

Obama made it even more generous. Before it was 15% for 25 years then it became 10% for 20 years under Obama. This further incentivized universities to jack up tuition and to expand, and incentivized students to borrow more money.

The results:

(1) Because of student loan debt has gone thru the roof, taxpayers will end up paying for this debt.

(2) Students are chained to their debt. They are having a difficult time buying a house because their debt to income ratio is too high which hurts the overall economy.

(3) Contributed to the pharmacy saturation which affects every pharmacist.




Sent from my iPhone using SDN mobile

These forgiveness plans will continue to change causing wave-effects while (my conserved assumption) tax brackets go up so that the tax bomb also (wave-effects) gets bigger (excluding PSLF of course).

I say to each their own. Something I won’t have to nearly worry about as others when it comes to loans

 

[DrVader]

Hi guys.

Just recently became a pharmacist and OVERWHELMED with the amount of federal debt I owe. Currently it's ~310k (including undergrad). I have two options in my head that I am considering. One is completely sane and justifiable while the other allows a more luxurious lifestyle/opportunities for investments. As you can tell by my definitions for each, I might be leaning towards the latter.

The first is aggressively paying off my debt - just throw in as much as I can with whatever I have left at the end of the month. Yeah, that's great and all but I would be doing this for about 10 years and this is NOT at all appealing to me. My mindset is hinged on what's happening now and I am always thinking of not knowing whether today would be my last (I know, grim. Happy Halloween!). I've had a few near-death experiences and they have obviously affected the way I think.

The second is, if you are aware of the current repayment options, picking "PAYE" and paying 10% of my salary towards loans while using the remainder for 401k/Roth IRA/stocks/a horse/whatever. I understand that after the 20 year repayment term, the remaining that would be forgiven would be considered TAXABLE INCOME. I used a calculator online and the amount forgiven would be about ~430k after 20 years. Who knows what the income tax will be 20 years from now, but currently, under Trump taxes, it would be about $167k, so I'm guessing it would be around that ballpark, give or take 20k? ...Or it could be even more, who knows. I'm considering paying it off with whatever I make from selling a house that I'll be buying in the near future IF that housing market goes up. Obviously being able to pay off the tax on the forgiven amount is based on a lot of "if's" - IF I make money through investing, IF I make money from selling a house, IF I marry a multimillionaire - but the thought of not worrying about money throughout my 20 years of life is sort of enticing. I don't know. I've seen people literally throw out their backs and wear back braces for years from working too hard. I don't want to be that.

Anyway, let me know what your plan is, thought process, income/debt amount. Anything is appreciated. Thanks.

TLDR;
What is your experience or plan with paying off debt? Any good sites/calculators to help choose a path? Please be specific with how you paid off or will pay off debt.

You are assuming that the forgiveness plan will be in place. I am telling you that it is a pipe dream. We are living in a 1.6 trillion dollar bubble. The whole point of income based payment is just to keep people paying something before the bubble burst. I would get a part time job and work 60 hrs a week for a year or two aand live very bery lean.

 

[wagrxm2000]

Obama made it even more generous. Before it was 15% for 25 years then it became 10% for 20 years under Obama. This further incentivized universities to jack up tuition and to expand, and incentivized students to borrow more money.

The results:

(1) Because of student loan debt has gone thru the roof, taxpayers will end up paying for this debt.

(2) Students are chained to their debt. They are having a difficult time buying a house because their debt to income ratio is too high which hurts the overall economy.

(3) Contributed to the pharmacy saturation which affects every pharmacist.

It is not just Obama policy but there was a major push to provide access to higher education for everyone. Every student, including a 2.0 GPA student, got the opportunity to borrow up the nose and attend a fancy college.


Sent from my iPhone using SDN mobile

Shhhh, you can't say those things. Obama is seen as a god here. People just don't see what he actually did to destroy our economy.

 

[danicuhmae]

Consensus looks like it's time to buckle down and pay it off asap. Any one know of good beans and rice recipes?

Also, PSLF I hear is extremely hard to get into AND looks to be the most temporary out of all income-based repayment plans.

 

[danicuhmae]

Try to find a non-profit to get the 10 year loan forgiveness. Most hospitals are non-profit and qualify. As others have said the 10 year forgiveness may not last but if you are going to be paying anyways you might as well do it and hope that it sticks. I am on PAYE and my first year of the 10 I only paid like $10 a month b/c it is based on what you earned the previous year (I was a P4 and only made like 8k that year). So I was able to knock out 12 of the 120 payments by only paying $10 a month

Since you're on PAYE. How are you going to pay off your loans? Stick to the minimum for 20 years? Are you not worried about the "tax bomb" or the possibility of PAYE not even existing in the future?

 

[wagrxm2000]

Consensus looks like it's time to buckle down and pay it off asap. Any one know of good beans and rice recipes?

How much are you planning on paying per year towards it?

 

[BenJammin]

PAYE/REPAYE/whatever shouldn't even be an option for you. You are a pharmacist and you need to pay your bills like everyone else. None of us deserve a bailout from our responsibilities.

 

[Momus]

I would get a part time job and work 60 hrs a week for a year or two aand live very bery lean.

Good luck trying to find an employer who wants to pay you 20h OT/w.

 

[jjcayce123]

Since you're on PAYE. How are you going to pay off your loans? Stick to the minimum for 20 years? Are you not worried about the "tax bomb" or the possibility of PAYE not even existing in the future?

I'm on the non-profit loan forgiveness so its 10 years. It may not be around when I am able to be forgiven. Also you are heavily taxed on whatever amount you owe at the time your 10 years is done. I will at most save me like 30k or so

 

[danicuhmae]

How much are you planning on paying per year towards it?

Around ~48k if emergencies don't get in the way and I'm employed and my income remains the same. With the pharmacy world where it is now, I'm not sure how well job security will be in the future, especially retail (where I'll be). Mind you the 310k is my current debt. Still in deferment and interest hasn't capitalized yet. With 10 year repayment plan, it's currently at 3500/month. Probably shoot up to 4k/month. Worried if that's realistic for 240 months straight.

 

[danicuhmae]

I'm on the non-profit loan forgiveness so its 10 years. It may not be around when I am able to be forgiven. Also you are heavily taxed on whatever amount you owe at the time your 10 years is done. I will at most save me like 30k or so

Congratulations. Heard it was hard to get into PSLF program. How much is left on your loans, if you don't mind disclosing?

 

[BMBiology]

These forgiveness plans will continue to change causing wave-effects while (my conserved assumption) tax brackets go up so that the tax bomb also (wave-effects) gets bigger (excluding PSLF of course).

I say to each their own. Something I won’t have to nearly worry about as others when it comes to loans

I don’t think the government will increase tax on the average joe (not directly). More likely, the government will need to devalue the dollar to meet its social obligations (social security, medicare, student loans). It will do this by borrowing more money (and printing more money) but since it owes a mountain of debt, it will need to offer premium interest rate and as a result, interest rate, from credit card to mortgage, will also need to go up.

Devalued dollar + higher interest rate = tax on the average joe.


Sent from my iPhone using SDN mobile

 

[jjcayce123]

Around ~48k if emergencies don't get in the way and I'm employed and my income remains the same. With the pharmacy world where it is now, I'm not sure how well job security will be in the future, especially retail (where I'll be). Mind you the 310k is my current debt. Still in deferment and interest hasn't capitalized yet. With 10 year repayment plan, it's currently at 3500/month. Probably shoot up to 4k/month. Worried if that's realistic for 240 months straight.

Paying $3500 a month gives you practically nothing to live, even in the most affordable cities. Take whatever salary you think you might make and multiply that by 0.7....that will at least give you a realistic number of what you will actually take home.

 

[jjcayce123]

Around ~48k if emergencies don't get in the way and I'm employed and my income remains the same. With the pharmacy world where it is now, I'm not sure how well job security will be in the future, especially retail (where I'll be). Mind you the 310k is my current debt. Still in deferment and interest hasn't capitalized yet. With 10 year repayment plan, it's currently at 3500/month. Probably shoot up to 4k/month. Worried if that's realistic for 240 months straight.[/QUOT

 

[jjcayce123]

so so so naive...paying 48k. Taxes will eat you up

 

[jjcayce123]

Congratulations. Heard it was hard to get into PSLF program. How much is left on your loans, if you don't mind disclosing?

Its not hard to get in to. Getting a hospital job is the hard part.

 

[BC_89]

Around ~48k if emergencies don't get in the way and I'm employed and my income remains the same. With the pharmacy world where it is now, I'm not sure how well job security will be in the future, especially retail (where I'll be). Mind you the 310k is my current debt. Still in deferment and interest hasn't capitalized yet. With 10 year repayment plan, it's currently at 3500/month. Probably shoot up to 4k/month. Worried if that's realistic for 240 months straight.

You may/may not have seen this thread already, but your 48k reminded of this individual.

Is paying $4,000/month in student loans good enough?

As it goes without saying, Emergencies will happen so always have a nice savings in reserves....’Tis life

 

[danicuhmae]

so so so naive...paying 48k. Taxes will eat you up

I've accounted for state and income tax. This is when rent is 550/month, no 401k contribution, no car payments, no cell payments (thanks dad), and I spend minimal for food.

You may/may not have seen this thread already, but your 48k reminded of this individual.

Is paying $4,000/month in student loans good enough?

As it goes without saying, Emergencies will happen so always have a nice savings in reserves....’Tis life

I do have an emergency fund set (don't like to rely on family, but they can help out if needed also). I'll take a look at the thread. Considering starting on 401k after 2 years of repayment to knock off atleast ~95k.

 

[babybull]

Congratulations. Heard it was hard to get into PSLF program. How much is left on your loans, if you don't mind disclosing?

if you would do the math, on repaye with 310k in loans you would likely pay roughly the same over 25 years (this is including the tax bomb) as you would were you to aggressively pay it all off over 10 years. this isnt even counting all the money you would earn by investing savings. repaye wins. additionally, in the case of repaye, you get to save for retirement, you get to save for a house, invest in the stock market, go on vacations, enjoy good food, etc.

life starts now. not when you are 45 like what these old geezers think. you are absolutely not setting yourself behind financially by enrolling in repaye. you are setting yourself ahead in these circumstances. the reason these board members dont understand this is because they never owed 310k in student loans.

instead, they assume that because they paid off their mighty 150k debt in 3 years that this strategy would work in yours too. not to mention, employment is at its best in decades and the pharmacy job market is doing barely okay. imagine when it tapers off like how it is expected to in the near future, how pharmacy might be affected.

 

[Adsum]

if you would do the math, on repaye with 310k in loans you would likely pay roughly the same over 25 years (this is including the tax bomb) as you would were you to aggressively pay it all off over 10 years. this isnt even counting all the money you would earn by investing savings. repaye wins. additionally, in the case of repaye, you get to save for retirement, you get to save for a house, invest in the stock market, go on vacations, enjoy good food, etc.

life starts now. not when you are 45 like what these old geezers think. you are absolutely not setting yourself behind financially by enrolling in repaye. you are setting yourself ahead in these circumstances. the reason these board members dont understand this is because they never owed 310k in student loans.

instead, they assume that because they paid off their mighty 150k debt in 3 years that this strategy would work in yours too. not to mention, employment is at its best in decades and the pharmacy job market is doing barely okay. imagine when it tapers off like how it is expected to in the near future, how pharmacy might be affected.

Why do you think we are out of touch for suggesting he pays the loans? I recently paid off $220,00 while still under 30. While it would have taken me a few more years to knock out 310,000, it is still doable.

Honestly, paying down the loans was the best financial lesson of my life. It taught me to live under my means, to be content with less, to not be afraid of working hard (no, it will not break your back) and to follow through with my goals.

I would argue that someone who spent $310,000 on a PharmD is even more in need of these lessons than I was.

Sure, he could not aggressively pay down loans. Instead he could choose a repayment plan, “invest” the rest on his retirement, get a nice house in a nice neighborhood and have a nice life. He will still not be any happier than had he chosen to pay down his loans. If anything he might be worse off financially.

 

[wagrxm2000]

if you would do the math, on repaye with 310k in loans you would likely pay roughly the same over 25 years (this is including the tax bomb) as you would were you to aggressively pay it all off over 10 years. this isnt even counting all the money you would earn by investing savings. repaye wins. additionally, in the case of repaye, you get to save for retirement, you get to save for a house, invest in the stock market, go on vacations, enjoy good food, etc.

life starts now. not when you are 45 like what these old geezers think. you are absolutely not setting yourself behind financially by enrolling in repaye. you are setting yourself ahead in these circumstances. the reason these board members dont understand this is because they never owed 310k in student loans.

instead, they assume that because they paid off their mighty 150k debt in 3 years that this strategy would work in yours too. not to mention, employment is at its best in decades and the pharmacy job market is doing barely okay. imagine when it tapers off like how it is expected to in the near future, how pharmacy might be affected.

You are assuming the market produces over 6% a year over the next 25 years. While that could happen it also might not even get close.

The tax might also be much higher and who knows what REPAYE will be like in 25 years.

Also I calculate much more being paid instead of paying it off quickly but not sure what his calculated payment would be.

Think of it this way, if you could secure a 30 year CD for 6% who wouldn't take it?

 

[lord999]

You are assuming the market produces over 6% a year over the next 25 years. While that could happen it also might not even get close.

The tax might also be much higher and who knows what REPAYE will be like in 25 years.

Also I calculate much more being paid instead of paying it off quickly but not sure what his calculated payment would be.

Think of it this way, if you could secure a 30 year CD for 6% who wouldn't take it?

Me. 30 years without some high period of inflation, simply impossible.

US Inflation Rate by Year

And yes, I think the future super crisis happens when the Fed has to do an 8% correction and wipe out banks due to nonperforming loans.

 

[wagrxm2000]

Me. 30 years without some high period of inflation, simply impossible.

US Inflation Rate by Year

And yes, I think the future super crisis happens when the Fed has to do an 8% correction and wipe out banks due to nonperforming loans.

Could you expand on your thoughts? Are you saying you wouldn't secure 6%?

I personally don't think we'll see rates that high without being in a huge crisis.

 

[BMBiology]

in the case of repaye, you get to save for retirement, you get to save for a house, invest in the stock market, go on vacations, enjoy good food, etc.

You are a pharmacist, not some multimillionaire. The main drawback of having high debt to income ratio is you will have a hard time getting a mortgage. It might not matter if you are buying a house in Kentucky but it is a huge factor if you are buying in California, New York, Seattle, just to name a few expensive coastal cities. You will be a renter for years to come. You can't be a baller when you can't even buy a house so yeah...enjoy your fancy vacation, good food and nice car. Oh, did I tell you...your monthly car payment would also increase your debt to income ratio?

 

[wagrxm2000]

You are a pharmacist, not some multimillionaire. The main drawback of having high debt to income ratio is you will have a hard time getting a mortgage. It might not matter if you are buying a house in Kentucky but it is a huge factor if you are buying in California, New York, Seattle, just to name a few expensive coastal cities. You will be a renter for years to come. You can't be a baller when you can't even buy a house so yeah...enjoy your fancy vacation, good food and nice car. Oh, did I tell you...your monthly car payment would also increase your debt to income ratio?

Such a Debbie downer

 

[babybull]

You are a pharmacist, not some multimillionaire. The main drawback of having high debt to income ratio is you will have a hard time getting a mortgage. It might not matter if you are buying a house in Kentucky but it is a huge factor if you are buying in California, New York, Seattle, just to name a few expensive coastal cities. You will be a renter for years to come. You can't be a baller when you can't even buy a house so yeah...enjoy your fancy vacation, good food and nice car. Oh, did I tell you...your monthly car payment would also increase your debt to income ratio?

you could buy a $500,000 house on a $120000 salary and $500,000 student loan debt. just look at fannie mae or freddie mac underwriting guidance on the matter. lenders can ignore how much you owe and instead consider your monthly payment.

for example, it's entirely possible to have 500k student loan debt but be paying merely $400 a month on student loans. the lender will see $400, not $500,000. again, this is based on fannie mae guidelines. a new grad i work with just bought a $550k+ house recently in orange county, CA. what's more, we have the same income and debt scenario. he switched to repaye a while back after i told him about it.

admittedly, i am currently on repaye. i paid off my car, am maxing my roth/401k, have traveled to two different countries in the past 2 years since i started working, eat out virtually every weekend with people that matter to me (i dislike cooking), paid for my siblings and parents to go on trips, and have saved $100k in the past two years for a house down payment. all the while i owe $300k+ in student loans. i'm no multimillionaire you are right. but i have still been able to enjoy life with 300k+ student loan debt, all thanks to repaye and no thanks to any of the advice being given on this board.

 

[BMBiology]

you could buy a $500,000 house on a $120000 salary and $500,000 student loan debt. just look at fannie mae or freddie mac underwriting guidance on the matter. lenders can ignore how much you owe and instead consider your monthly payment.

Lenders generally take your monthly student loan payment or 0.5-1% of your total student debt as your monthly student loan payment, whichever is greater. So lets say your monthly student loan payment is $1000 and you owe $400,000 in student loans (1% of $400,000 is $4,000). Instead of using $1000 as your monthly student loan debt, the lender would use $4,000. Even if you are able to find a lender, you would end up paying a higher mortgage interest rate.

 

[babybull]

Lenders generally take your monthly student loan payment or 0.5-1% of your total student debt as your monthly student loan payment, whichever is greater. So lets say your monthly student loan payment is $1000 and you owe $400,000 in student loans (1% of $400,000 is $4,000). Instead of using $1000 as your monthly student loan debt, the lender would use $4,000. Even if you are able to find a lender, you would end up paying a higher mortgage interest rate.

that depends. if the lender is using anything other than fannie mae underwriting on their home loans, that is probably right. otherwise, they will see the student loan monthly payment even if it is $0 (let's say one loses a job for a month).

the trick here is to find a lender that uses fannie mae underwriting rules. but one wouldn't know to do that unless they knew about it. for anyone looking at this, now you know.

 

[BMBiology]

the trick here is to find a lender that uses fannie mae underwriting rules. but one wouldn't know to do that unless they knew about it. for anyone looking at this, now you know.

Two things....(1) this would limit your option of lender which means you may have to pay higher mortgage interest rate (makes buying a house less affordable); (2) underwriting rules are subject to change.

 

[babybull]

Why do you think we are out of touch for suggesting he pays the loans? I recently paid off $220,00 while still under 30. While it would have taken me a few more years to knock out 310,000, it is still doable.

Honestly, paying down the loans was the best financial lesson of my life. It taught me to live under my means, to be content with less, to not be afraid of working hard (no, it will not break your back) and to follow through with my goals.

I would argue that someone who spent $310,000 on a PharmD is even more in need of these lessons than I was.

Sure, he could not aggressively pay down loans. Instead he could choose a repayment plan, “invest” the rest on his retirement, get a nice house in a nice neighborhood and have a nice life. He will still not be any happier than had he chosen to pay down his loans. If anything he might be worse off financially.

if you hadnt paid it off aggressively, say you had put that money in the stock market or bought a home, how much better off would you have been? im specifically referring to the years 2012-2015 where since then anyone who has invested a mere 100k would have a 100%+ return on their money. paying off your student loans is inspiring and heroic but the market rewards you none for the financial lessons you just paid for

and i disagree. it will be difficult being happy (pharmacist standards being used here) paying 3.6k monthly for the next 10 years after just having gone to school for 8 years. you'll be around 36 when you effectively start making pharmacist pay. a high school teacher is rewarded better financially than that pharmacist scenario.

 

[wagrxm2000]

if you hadnt paid it off aggressively, say you had put that money in the stock market or bought a home, how much better off would you have been? im specifically referring to the years 2012-2015 where since then anyone who has invested a mere 100k would have a 100%+ return on their money. paying off your student loans is inspiring and heroic but the market rewards you none for the financial lessons you just paid for

That's where taking guaranteed returns come in.

This year flat, next year probably flat or down.

Over the next five years, you'll be lucky to have a decent return rate. It could even be negative.