PAYE question- am I ineligible?

[odyssey2]

Hey guys, I took out a federal loan in 2006 for college which I've already paid off. I'm about to start medical school in the fall, and I've been interested in the PAYE repayment program as an option for my future med school loans. However, I saw on the studentaid site that you must be a new borrower after 10/1/2007. Would this make me ineligible, or is this only referring to loans for which you would use PAYE?

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[DrMidlife]

ineligible now. watch the news to see what happens with proposed grandfathering by executive order. i paid off 1984 loans so i'm right there with you.

 

[odyssey2]

Wow. Even if they were fully paid several years ago? I wonder what the point of that restriction is.

 

[odyssey2]

I'm assuming Stafford loans would still count? That's the only thing I took out in college.

 

[RangerBob]

You're eligible if you paid off that loan prior to, and had no federal loans on, 10/1/2007. If you finished paying it off after that you are not eligible.

I'm in the same boat--one loan from 2006 (a $5,000 whopper...) that because I still had as of that particular date in 2007 (and has since been paid off), I am ineligible for PAYE. That one loan makes or (in my case) breaks the whole thing for me.

Honestly it bugs me that it's rather arbitrary, but it's not a huge deal. I can afford to pay back 15% of my AGI on my resident salary and it pays a little more of my loans off, and I don't have any plans of "taking advantage" of loan forgiveness through the income-based plans since they tax you on the remainder. As an attending I'll stay on IBR as long as I can and pay a lot extra each month to get those higher-interest rate GradPlus loans paid off sooner, so I'd be paying more than 15% anyway...

But as DrMidlife mentions, stay tuned. I believe this December PAYE will be extended to most borrowers, but it'll be a revised PAYE (ie., monthly payment is 10% of your AGI, but if you owe more than $50k or so, then you make 25 years of payments to get (taxable) loan forgiveness).

 

[odyssey2]

Thanks guys, hopefully that extension will take place.

 

[odyssey2]

So I was just looking up the other options on AAMC, and since I didn't have any outstanding loan debt on 7/1/2014, does this mean I would qualify for the 10% discretionary income/20 year IBR (which seems essentially the same as PAYE)?

 

[phuong123]

http://www.forgetstudentloandebt.co.../pay-as-you-earn-student-loan-repayment-plan/

 

[phuong123]

Hey guys, I took out a federal loan in 2006 for college which I've already paid off. I'm about to start medical school in the fall, and I've been interested in the PAYE repayment program as an option for my future med school loans. However, I saw on the studentaid site that you must be a new borrower after 10/1/2007. Would this make me ineligible, or is this only referring to loans for which you would use PAYE?

Yes, you will qualify for PAYE, according to above link, If you had loans before October 1st, 2007, you won’t be able to enroll in the PAYE plan, unless you first pay those loans off entirely, then take out a new loan and use PAYE to pay off that new loan.

 

[Student Loan Planner]

The company at the above link in my opinion is a scam operation that seeks to use hyped up language and promises to get customers to hand over hundreds or even thousands of dollars for information you can obtain free from your loan servicer. You are NOT eligible for PAYE because you had loans before Oct 1, 2007 period. You ARE eligible for REPAYE assuming all your loans are in the Direct loan program. PAYE and REPAYE are not the same thing and it's dishonest of the company to suggest this, again in my opinion. They just want to have an option to put you on a payment plan that costs less upfront so they can have an excuse to charge you. I'm being cautious in my statements because these are profit hungry people so it's necessary to protect myself by stating my feelings as opinion rather than fact.

 

[Nguyen2017]

I had federal loan before 2014 and paid it off before 2014. Am I eligible for IBR for new borrower if I start the loan this year 2017?

 

[Student Loan Planner]

I had federal loan before 2014 and paid it off before 2014. Am I eligible for IBR for new borrower if I start the loan this year 2017?

No you have to be a new borrower that never took out loans before

 

[Nguyen2017]

Then what is the difference between PAYE and IBR for New borrower?
I thought some people are not eligible for PAYE but are eligible for IBR for new borrower.
But from what you said above, whoever is not eligible for PAYE (borrowed before 2009) is not eligible for IBR for new borrower either.
If so, what is the use of this IBR for new borrower plan when if they are eligible for this plan (i.e. never borrow before 2014), they can use PAYE?

 

[DrMidlife]

if you're not eligible for PAYE you're supposed to do REPAYE.

please at least read the basics: https://studentaid.ed.gov/sa/repay-loans/understand/plans/income-driven

 

[Nguyen2017]

if you're not eligible for PAYE you're supposed to do REPAYE.

please at least read the basics: https://studentaid.ed.gov/sa/repay-loans/understand/plans/income-driven

I know.
That's not my question.
REPAY will be my last option because it counts my husband's income.

 

[RangerBob]

I know.
That's not my question.
REPAY will be my last option because it counts my husband's income.

I think the only thing that disqualifies someone from IBR is if they make too much money, which occurs when your 15% monthly payment equals/exceeds the 10-year standard repayment. Your loans don't even have to be direct loans.

One thing to keep in mind is if your husband has loans as well, and is on IBR (or another income-driven plan), then REPAYE would save you money, as both of your payments take into account both of your incomes (which is a con), but also both of your loans (which is helpful for getting a lower payment).

My wife and I were both on IBR. We save quite a bit each month now that we're in REPAYE, and the interest subsidy alone is worth it. Even if your husband has no loans, you should calculate what your payments would actually be--the interest subsidy is a really nice gift and if you owe a lot, can almost essentially halve your effective interest rate. Your monthly payment might be bigger in that scenario, but if it saves you more money overall it's definitely worth doing. A lot of people don't seem to understand it's essentially "free money" and focus just on the monthly payment, but I wish more people would think long term.

 

[DrMidlife]

You know, so that means you've read the table on the linked page, so you know that non-new borrowers *are* eligible for IBR.

If the question is "how do i get the 10% payment cap as a non-new borrower?" that's a question for your congressperson.

 

[Student Loan Planner]

I know.
That's not my question.
REPAY will be my last option because it counts my husband's income.

I've almost never seen someone filing their taxes separately due to IBR's exclusion for spousal income that it's actually been worth it for. Most people end up costing themselves more in taxes than they save in student loan payments

 

[Nguyen2017]

I will think more after I graduate and have an income.
For now, my husband earns 55K. He doesn't have any loans. I earn 12K. We have 2 kids. Our federal tax amount this year is 1300, state tax is 300, filing jointly.
I also tried to do the tax separately with one claiming one child as a dependent. In this case, I don't pay any tax, my husband pays 3500 for fed tax, 1200 for state tax.
We'll see what'll happen if in the future I earn more than 12k, and my husband still makes 55k.
I had a loan in 2007 and paid it off in 2012.
My tuition is 160K and they let me borrow 250K max (direct loan and grad plus loan).

 

[Student Loan Planner]

I will think more after I graduate and have an income.
For now, my husband earns 55K. He doesn't have any loans. I earn 12K. We have 2 kids. Our federal tax amount this year is 1300, state tax is 300, filing jointly.
I also tried to do the tax separately with one claiming one child as a dependent. In this case, I don't pay any tax, my husband pays 3500 for fed tax, 1200 for state tax.
We'll see what'll happen if in the future I earn more than 12k, and my husband still makes 55k.
I had a loan in 2007 and paid it off in 2012.
My tuition is 160K and they let me borrow 250K max (direct loan and grad plus loan).

What program is this for? That's a ton of debt. For how long a period will you be in school? It's my understanding (I'm not a CPA) that you lose all child tax credits with filing separately

 

[Nguyen2017]

What program is this for? That's a ton of debt. For how long a period will you be in school? It's my understanding (I'm not a CPA) that you lose all child tax credits with filing separately

Pharmacy school. Tuition is 53k/year for 3 years.
We still get child tax credit when we file separately and claim one child as a dependent of each of us. ($1000 per child.)
Our tax is quite simple though. I'm not sure about others'.
It really depends on the income of each of the parents. If the couple makes more than certain amount (like 150K total?), they won't get any child tax credit (for 2 children) even if they file jointly as I think.

"The phase out threshold is $55,000 for married couples filing separately; $75,000 for single, head of household, and qualifying widow or widower filers; and $110,000 for married couples filing jointly. For each $1,000 of income above the threshold, your available child tax credit is reduced by $50."

(So if husband makes 50k, wife makes 100K, filing separately with the husband claiming kids as dependents will get some child tax credit compared to filing jointly will get $0?)

 

[Student Loan Planner]

Pharmacy school. Tuition is 53k/year for 3 years.
We still get child tax credit when we file separately and claim one child as a dependent of each of us. ($1000 per child.)
Our tax is quite simple though. I'm not sure about others'.
It really depends on the income of each of the parents. If the couple makes more than certain amount (like 150K total?), they won't get any child tax credit (for 2 children) even if they file jointly as I think.

"The phase out threshold is $55,000 for married couples filing separately; $75,000 for single, head of household, and qualifying widow or widower filers; and $110,000 for married couples filing jointly. For each $1,000 of income above the threshold, your available child tax credit is reduced by $50."

(So if husband makes 50k, wife makes 100K, filing separately with the husband claiming kids as dependents will get some child tax credit compared to filing jointly will get $0?)

If you're doing pharmacy school why would you care about the income driven repayment programs? You'll pay back your loans before they're forgiven anyway. All you'd accomplish by using income driven repayment is drawing the payments out and spending $100,000+ more in interest. If you're planning on working in a private sector job you should be looking at refinancing and paying them back asap not REPAYE or PAYE with filing separately, in my view that is

 

[Nguyen2017]

If my loan is 250K total, 6.5% interest, I'll have to pay 36k/year for 10 years (standard payment) or 20k/year for 25 years according to
https://studentloans.gov/myDirectLoan/mobile/repayment/repaymentEstimator.action

With PAYE, I'll probably pay less than 20k/year for 20 years? (supposed my future income is 50k-100k)
I look into this because
1) job market for pharmacy is bad. I've heard lots of new grads are on PAYE.
2) I may need $ to do something else so I don't want to pay off the loan ASAP.
(I may want to pay back the loan less and keep the money to do something else if the 6.5% is an acceptable interest rate.)

I just want to consider all the options I can have for now. I still don't understand much all the income driven repayment plans tho.

 

[Nguyen2017]

You know, so that means you've read the table on the linked page, so you know that non-new borrowers *are* eligible for IBR.

If the question is "how do i get the 10% payment cap as a non-new borrower?" that's a question for your congressperson.

The linked page above says

*For the IBR Plan, you're considered a new borrower on or after July 1, 2014, if you had no outstanding balance on a William D. Ford Federal Direct Loan (Direct Loan) Program loan or Federal Family Education Loan (FFEL) Program loan when you received a Direct Loan on or after July 1, 2014. (Because no new FFEL Program loans have been made since June 30, 2010, only Direct Loan borrowers can qualify as new borrowers on or after July 1, 2014.)

I had a subsidized Stafford loan (FFEL loan) in 2007 and paid off in 2012.
I started to get Direct loan in 2017.
==> I didn't owe $ from 2013-2016.

Does that mean I "had no outstanding balance on a William D. Ford Federal Direct Loan (Direct Loan) Program loan or Federal Family Education Loan (FFEL) Program loan when you (/ I) received a Direct Loan on or after July 1, 2014."?

That is my question.

 

[Nguyen2017]

The very tricky and harder question is the one that the person initiated this thread asked!!!

The linked page above also says

"... to qualify for the PAYE Plan you must also be a new borrower as of Oct. 1, 2007, and must have received a disbursement of a Direct Loan on or after Oct. 1, 2011. You're a new borrower if you had no outstanding balance on a Direct Loan or FFEL Program loan when you received a Direct Loan or FFEL Program loan on or after Oct. 1, 2007."

If I had a Stafford loan in 2006, and paid it off in 2012.
I received a Direct Loan in 2015, and didn't owe any $ when receiving Direct Loan in 2015, does that mean I "had no outstanding balance on a Direct Loan or FFEL Program loan when you received a Direct Loan or FFEL Program loan on or after Oct. 1, 2007."?

I saw the answer is NO.
But I think, just by examining the wording above, answer should be yes.

 

[Student Loan Planner]

The very tricky and harder question is the one that the person initiated this thread asked!!!

The linked page above also says

"... to qualify for the PAYE Plan you must also be a new borrower as of Oct. 1, 2007, and must have received a disbursement of a Direct Loan on or after Oct. 1, 2011. You're a new borrower if you had no outstanding balance on a Direct Loan or FFEL Program loan when you received a Direct Loan or FFEL Program loan on or after Oct. 1, 2007."

If I had a Stafford loan in 2006, and paid it off in 2012.
I received a Direct Loan in 2015, and didn't owe any $ when receiving Direct Loan in 2015, does that mean I "had no outstanding balance on a Direct Loan or FFEL Program loan when you received a Direct Loan or FFEL Program loan on or after Oct. 1, 2007."?

I saw the answer is NO.
But I think, just by examining the wording above, answer should be yes.

You have to be considered a completely new borrower under the federal student loan system to qualify for new IBR, so you won't be eligible

 

[Nguyen2017]

I wish they delete the phrase "outstanding balance on a" completely, and replace "when" with "before" so that it's easier to understand if they mean new borrower is the one who never had a loan before.

 

[RangerBob]

If I had a Stafford loan in 2006, and paid it off in 2012.
I received a Direct Loan in 2015, and didn't owe any $ when receiving Direct Loan in 2015, does that mean I "had no outstanding balance on a Direct Loan or FFEL Program loan when you received a Direct Loan or FFEL Program loan on or after Oct. 1, 2007."?

I saw the answer is NO.
But I think, just by examining the wording above, answer should be yes.

The Stafford loan you took out in 2006 disqualifies you from PAYE. If you had paid it off by Oct 1, 2007, then you would be PAYE-eligible. I was in the same situation myself. Basically, you can't have had any federal debt on Oct 1, 2007.

One thing you need to keep in mind with IBR/PAYE/REPAYE forgiveness is that you pay taxes on the amount forgiven. At the current tax rates (which could very well be higher in the future), that means paying 35% in taxes on how ever many hundreds of thousands you owe if you're paying the minimum and not even covering accumulating interest.

In addition, the gov't is likely to eliminate/change PSLF forgiveness, and it wouldn't surprise me if they try to do the same for IBR/PAYE/REPAYE forgiveness as well.

 

[Nguyen2017]

The Stafford loan you took out in 2006 disqualifies you from PAYE. If you had paid it off by Oct 1, 2007, then you would be PAYE-eligible. I was in the same situation myself. Basically, you can't have had any federal debt on Oct 1, 2007.

One thing you need to keep in mind with IBR/PAYE/REPAYE forgiveness is that you pay taxes on the amount forgiven. At the current tax rates (which could very well be higher in the future), that means paying 35% in taxes on how ever many hundreds of thousands you owe if you're paying the minimum and not even covering accumulating interest.

In addition, the gov't is likely to eliminate/change PSLF forgiveness, and it wouldn't surprise me if they try to do the same for IBR/PAYE/REPAYE forgiveness as well.

I got it. Thanks a lot!

Yes, I know I'll have to pay about 1/3 of the amount forgiven for tax. (I'm thinking the tax amount can be equal to half of my original loan amount. But I'm also taking into account the inflation / future value of the money... I don't have to pay tax until 20 years later.)
I'm just trying to understand the requirements for PAYE/IBR for new borrower (10% cap, 20 year thing).
I may not think about REPAYE because I may pay off the loan before 25 years if I'm on this plan since it counts my husband's income. So it's kind of equivalent to extended stardard payment in my (future) case. So I will just do the extended fixed instead of REPAYE, only consider it if I can't find a full time job at all for a long time and can't do IBR/PAYE.

I haven't paid attention to PSLF because I don't think I can find a job at a place where I qualify for this plan. But I see somewhere it says I don't have to pay tax on the amount forgiven if I'm on this plan.
Do you mean gov't is likely to eliminate IBR/PAYE/REPAYE plans? so suddenly they push people on these plans to standard payment plan and there's no more forgiveness?
When did these plans appear anyway?

 

[RangerBob]

I got it. Thanks a lot!

Yes, I know I'll have to pay about 1/3 of the amount forgiven for tax. (I'm thinking the tax amount can be equal to half of my original loan amount. But I'm also taking into account the inflation / future value of the money... I don't have to pay tax until 20 years later.)
I'm just trying to understand the requirements for PAYE/IBR for new borrower (10% cap, 20 year thing).
I may not think about REPAYE because I may pay off the loan before 25 years if I'm on this plan since it counts my husband's income. So it's kind of equivalent to extended stardard payment in my (future) case. So I will just do the extended fixed instead of REPAYE, only consider it if I can't find a full time job at all for a long time and can't do IBR/PAYE.

I haven't paid attention to PSLF because I don't think I can find a job at a place where I qualify for this plan. But I see somewhere it says I don't have to pay tax on the amount forgiven if I'm on this plan.
Do you mean gov't is likely to eliminate IBR/PAYE/REPAYE plans? so suddenly they push people on these plans to standard payment plan and there's no more forgiveness?
When did these plans appear anyway?

I'm not sure when the plans appeared--to me it doesn't matter. What matters is getting debt free. My wife and I owe enough and I will likely earn little enough (by physician standards), and her little enough, that we could easily drag payments on for 25 years. But I think that's a terrible plan. If you have the means to do so, pay off those loans as quick as possible. Why let your loan balance balloon over 25 years? (You mention 20, but I believe with the exception of PAYE, all income based plans require 25 years of payments for anyone with any graduate loans)

I get very worried when people ask about how to just minimize their IBR payment and max out on IBR/PAYE/etc forgiveness. If your husband makes enough that between the two of you, you could repay the loans much sooner, they why wouldn't you do that? Pay off those loans ASAP--starting now! You may not have the loans yet if you're still pre-pharm, but think preventative. Borrow less than the full cost of tuition if your husband is working. In fact, if he's working you probably shouldn't need to borrow anything for living expenses, and hopefully you can pay cash for some of the tuition (don't forget all the education tax credits--that's not unsubstantial at all).

I can't tell you how much I wish I worked more at preventing my loans from being larger now. I didn't live extravagantly in medical school at all, but I still feel like a little financial education/planning could've gone a long way. Being young, poor, and a student goes hand-in-hand and is actually kind of fun (as long as you have basic needs met). Being older, married, with kids, and significant educational debt, while trying to save for retirement, college, pay a mortgage, etc., is not fun.

In my mind, PSLF is the only forgiveness worth planning for (since it's tax-free, and not in the far distance future(. And even, you better have a contingency plan because I can guarantee you that program will change. The big question is whether it gets changed for current borrowers and/or people making PSLF-eligible payments.

 

[Nguyen2017]

I'm not sure when the plans appeared--to me it doesn't matter. What matters is getting debt free. My wife and I owe enough and I will likely earn little enough (by physician standards), and her little enough, that we could easily drag payments on for 25 years. But I think that's a terrible plan. If you have the means to do so, pay off those loans as quick as possible. Why let your loan balance balloon over 25 years? (You mention 20, but I believe with the exception of PAYE, all income based plans require 25 years of payments for anyone with any graduate loans)

I get very worried when people ask about how to just minimize their IBR payment and max out on IBR/PAYE/etc forgiveness. If your husband makes enough that between the two of you, you could repay the loans much sooner, they why wouldn't you do that? Pay off those loans ASAP--starting now! You may not have the loans yet if you're still pre-pharm, but think preventative. Borrow less than the full cost of tuition if your husband is working. In fact, if he's working you probably shouldn't need to borrow anything for living expenses, and hopefully you can pay cash for some of the tuition (don't forget all the education tax credits--that's not unsubstantial at all).

I can't tell you how much I wish I worked more at preventing my loans from being larger now. I didn't live extravagantly in medical school at all, but I still feel like a little financial education/planning could've gone a long way. Being young, poor, and a student goes hand-in-hand and is actually kind of fun (as long as you have basic needs met). Being older, married, with kids, and significant educational debt, while trying to save for retirement, college, pay a mortgage, etc., is not fun.

In my mind, PSLF is the only forgiveness worth planning for (since it's tax-free, and not in the far distance future(. And even, you better have a contingency plan because I can guarantee you that program will change. The big question is whether it gets changed for current borrowers and/or people making PSLF-eligible payments.

I totally agree with all you said. I got accepted to a school that has a total tuition of 160K. I planned to pay off my loan within 10 years after I graduate. Then I went to the pharmacy forum and saw people talking about how bad the pharmacy job market is and people are on PAYE. I didn't know what it is and tried to find out. And I'm interested to know about PAYE and IBR.
There are 2 kinds of IBRs. One is called IBR (15% cap, 25 years). The other is called "IBR for New borrowers" (10% cap, 20 years). I'm interested to know the 2nd one only.
I either pay off my loan with standard payment plan or with IBR for new borrowers if I'm eligible for the latter.
My husband and I are financially independent. We don't mix our money at all. He's frugal and smart with money and he doesn't want me to touch his money. I'm totally fine with it and that's our agreement before marriage. I'm a pharm tech and I want to go to pharmacy school. He thinks that is not a smart move because of the huge loan and bad job market. We live in CA and he's not willing to move out of state after I graduate if I need to land a job out of CA. He doesn't stop me going to school. My school is out of state so we have to move out of CA for 3 years. He has to quit his job (which he can get back after 3 years) and stays home to take care of 2 toddlers. They have to go to pre-schools too, just part time. That is why this whole thing is not a smart move in term of finance. But bc I want it, all expenses are on me. I have to take out maximum loan amount allowed at 6.5-7%. I can't borrow his $. He's trading stocks and he believes he can get a better return than lending me his money according his 5+ years of trading.

To do PSLF, I have to move to a remote area or something like that. I don't think my husband will agree to move there.
CA is saturated with pharmacy jobs. I'm worried about finding a job there. That's why I'm looking at IBR for new borrowers.
I totally understand the loan balance will balloon after 20 years at 7% rate. But sometimes I may want to keep the money in stocks for 10 years or more to see how it's like. I'm not sure about it but I just want to consider all the options.
(Btw, thank to housing crash in 2007 or so, we could get cheap houses so we don't worry much about mortgage and saving for retirement. We're extremely frugal so we don't need much money to live anyway.)

 

[RangerBob]

The not sharing financials seems a bit odd to me, as I'm basically taking over responsibility for all of my wife's student loans (over 100k). We have a baby on the way and finance is very much a team effort when you're married (and moreso when you have kids). But you have to do what works for you two I guess.

I would highly recommend against investing instead of borrowing less. I don't know what the current interest rate on loans are since now they get adjusted yearly, but mine were all at 6.8% (stafford) and 7.9 (gradplus). It would be very, very hard to beat that in the stock market, and you'd have to beat it by quite a bit to give room to accommodate for taxes on capital gains as well as the inconvenience of spending all that time/effort. Plus, who knows if the stock market is going to be bullish or bearish with the new administration? They're doing good right now, but no one really has any real clue what the Trump administration actually plans to do.

Stocks are risky. Student loans are a sure thing you have control over--for every dollar you don't take out in student loans, or every dollar you pay off instead of putting a dollar in the stock market, that's a guaranteed 6.8%-7.9% return on your investment. That's huge! I don't know a single person who wouldn't make that investment. I think any trader with a lifetime of experience would recommend that over investing in stocks.

In my opinion, the only reason to invest in stocks instead of paying off student loans (this assumes you have them--priority one would still be avoid taking loans in the first place) is if you are working at a PSLF-eligible position and hoping for forgiveness. You then invest the difference in what your IBR/REPAYE/PAYE monthly payment and the standard 10-year repayment is--that way if the program gets nixed/limited, you have the funds to deal with it. So I'd only recommend stocks as a back-up plan for people counting on forgiveness. I suppose you could argue you could do that for the 20-25 year forgiveness plans, but once again I wouldn't recommend keeping loans around that long. If you can live off just your husband's salary, you can then put all of your income towards your loans until their paid off. You say you're living frugally, so that seems like it could be a doable option.

One thing just to consider: Living (almost) anywhere other than CA saves you a ton of money. My childhood home back in the SF Bay Area is worth 1.7 million now. 1.7 million! For what is literally an average 50's 4bd 3ba ranch home on a quarter acre! Guess what that same home in a similar nice suburb costs where I live in the Great Lakes region. About $200-300k. That difference in cost pays for your pharmacy school, as well as undergrad and pharmacy school for both of your kids! If our families weren't all still living in CA, my wife and I wouldn't even consider taking a job in the SF or LA areas.

 

[Nguyen2017]

I will borrow less if I can spend less.
Tuition is 160K, can't spend less. They allow max 30k/year for expenses.
The grad plus loan rate is 6.31%, Direct Loan rate is 5.31%, not to mention loan fees. It's been decreasing for the last few years, about 0.5% each year.

I'm not sure if putting part of my income into stocks is a better investment than paying off 5.3% and 6.3% loans asap. I'll try stocks for several years to find out the answer. I understand the risk, but high risk can lead to high reward. Who knows I can pay off my loans much sooner if stock market is good (or I can lose most of the money that I should use to pay back the loans.)
I'll also look into refinance with lower interest rate probably when stocks crash and the government eliminates PAYE plan. That's definitely one of my options.

We will pay for kids' college if they go to Cal State or UC for undergrad. We don't plan to pay for their grad schools tho. They have to borrow grad loan just like we've done and are responsible for it.

 

[RangerBob]

I will borrow less if I can spend less.
Tuition is 160K, can't spend less. They allow max 30k/year for expenses.
The grad plus loan rate is 6.31%, Direct Loan rate is 5.31%, not to mention loan fees. It's been decreasing for the last few years, about 0.5% each year.

I'm not sure if putting part of my income into stocks is a better investment than paying off 5.3% and 6.3% loans asap. I'll try stocks for several years to find out the answer. I understand the risk, but high risk can lead to high reward. Who knows I can pay off my loans much sooner if stock market is good (or I can lose most of the money that I should use to pay back the loans.)
I'll also look into refinance with lower interest rate probably when stocks crash and the government eliminates PAYE plan. That's definitely one of my options.

We will pay for kids' college if they go to Cal State or UC for undergrad. We don't plan to pay for their grad schools tho. They have to borrow grad loan just like we've done and are responsible for it.

While you can't spend less than 160k on tuition without a scholarship, you certainly don't need to borrow that much if you have savings. Even with loans being as lot as 5.31% (which should now increase as the Fed increased interest rates, and possibly plan to do so again 3 more times this year), I would still focus on borrowing less/paying down student debt.

It's possible you can make better returns in the stock market--but it's not a guarantee. Just because stocks can lead to high reward isn't a reason to invest in stocks over loans. They can lead to high loss as well. Those loans will have a guaranteed return of probably closer to 6-7% when you take into account the higher student loan rates coming up. That's a nice tax-free return on your investment. If you want to go the stock route, go ahead, but unless you are one of the savviest of investors, or your investing through a employer matched retirement account, the smart thing is to borrow less/pay down student loans before investing in the stock market.

 

[Nguyen2017]

I agree with you it's not a guarantee and I have to be one of the savviest of investors.

I've just practiced investment for a year after seeing my husband doing well on his investments. (I don't know much of the performance but I see his returns have been higher than 7%. And he's been doing it since 2012.)
He absolutely won't take my money and do it for me as we all know it's not a guarantee. He can only give me advice/ideas and answer questions I have with lots of caution.
Within last year, my stock performance is good. But who knows how it will be in the long run.

I don't have any savings.
(My emergency fund is our HELOC account. I borrowed about 40k, at 5% interest rate, from my father to start trying to do stocks last year, with the promise to sell my stocks any time he wants the money back. I sell all my stocks and return the money when I stop working and focus on school.)
After graduate, I will apply for IBR for New Borrowers, which is exactly the same as PAYE, to see if I meet all its requirements, then will go from there.
That's the question I had when I came to this forum after seeing people in pharmacy forum mentioned PAYE used by new grads who can't get a full time job.

P.S: I'm thinking about the words "tax-free return" you mentioned which I just realize now and forgot to count in when weighing the 2 routes.