Financial/Loan Advice

[PA__to__MD]

Looking for advice from anyone who has been in the same boat. I'm graduating this May with about 400K in debt (undergrad, grad, med school). Leaning towards PAYE loan type, hoping for PSLF in the long run. Here's the catch... my wife is done with school and makes about 160K so if we add her salary and mine, my minimal monthly payment is over 2K a month. Plus her's is 3K since she refinanced to a 10-year repayment plan. Between bills and child care we're in a tough place financially.

Option 1: file jointly and deal with the crazy high student loan repayment. The advantage here is is will keep up in a 24% per year tax bracket verses 32% per year tax bracket, which puts around 17K back in our hands if in the lower tax bracket.

Option 2: file separately and my loan payments are lower, mine drops down to the $200 per month range but hers stays at 3K. We however end up in the higher tax bracket for her and have to pay 8% more in income taxes.

We plan to get a CPA this year to look things over, it wold be great to find someone also familiar with medical school debt/loan options. Just haven't had luck yet.

 

[libertyyne]

cpa time, stat.
PAYE is based on discrentionary income, so its quite possible your payment will not be as extreme as you think considering your wife is shelling out 3k.
Also by having your wife file seperately you are going to pay 170K in additional taxes over 10 years, that sounds insane considering its almost half of your loans.

 

[Cornfed101]

Student Loan Planner - Student Loan Advice and Help From Experts

The best source of student loan advice and student loan refinancing cash back bonuses for professionals with huge student debt.

www.studentloanplanner.com

I haven't personally worked with this guy (not done taking on loans yet), but I read his blog and have listened to podcasts with him and he knows a ton about student loan programs. He's a CPA that only works with doctors, lawyers, dentists, etc. and helping them figure out student loans.

 

[RangerBob]

The guy linked above does seem to have some good advice.

Who did your wife refinance with? If it's a private loan unfortunately that isn't taken into account with PAYE/REPAYE. If it's a Federal Loan, she could switch back to REPAYE and then your total family loan payment is 10% of your total family income.

What specialty are you going into? Sometimes PSLF doesn't make sense if you can pay it off quickly. If your wife is making $160k, and you're a physician, you might be able to pay off those loans very quickly. But if you do end up at a PSLF-eligible job, the smart thing to do may be to pay the minimum on your loans, and pay your wife's off ASAP (if hers aren't eligible for forgiveness). Once hers are paid off, re-assess the situation, and if you stand to gain more from PSLF than aggressively paying down your loans, consider putting extra money each month into an investment account or other "slush fund" technique in the event PSLF falls through.

 

[PA__to__MD]

Thanks for all he replies everyone. She’s with a SoFi, hoping to have hers paid off in 5ish years. We also have young kids, childcare and expenses add up. I’m hoping for urology (match is less than a month away!). PLSF seems to make sense if I stick to my tentative plan for 5-6 years residency (depending on the program) + 2 years for fellowship, I’m already most of the way there. I’ll probably stay in academics so with the pay cut I’m guessing I’ll be in the 225- 275K range starting out, but I’ll be at the 10 year mark 2-3 years after fellowship. According to the PLSF calculator I found, if I file separately and pay the minimum, I’ll end up with over $400K in loans forgiven.

This is of course all predicated on PLSF still existing a decade from now...

I’ll definitely check out the CPA mentioned above, thanks for his website.

 

[ACSurgeon]

Thanks for all he replies everyone. She’s with a SoFi, hoping to have hers paid off in 5ish years. We also have young kids, childcare and expenses add up. I’m hoping for urology (match is less than a month away!). PLSF seems to make sense if I stick to my tentative plan for 5-6 years residency (depending on the program) + 2 years for fellowship, I’m already most of the way there. I’ll probably stay in academics so with the pay cut I’m guessing I’ll be in the 225- 275K range starting out, but I’ll be at the 10 year mark 2-3 years after fellowship. According to the PLSF calculator I found, if I file separately and pay the minimum, I’ll end up with over $400K in loans forgiven.

This is of course all predicated on PLSF still existing a decade from now...

I’ll definitely check out the CPA mentioned above, thanks for his website.

also figure out how much of a tax bill you’ll get IF you’re actually forgiven and how you’re gonna pay that off.

 

[PA__to__MD]

According to the PSLF website, if forgiven it is not taxed as income, it’s simply forgiven.

 

[dpmd]

Filing separately only helps you for a while, meanwhile you realize you will be paying a bunch more in taxes. So paying more in taxes plus paying more in interest versus just paying your loans off sooner. Not too difficult if you think about it that way. I suppose you could always just get divorced and then you guys could file separately without losing out on certain deductions (and avoiding the dual high income earner extra taxes).