Question regarding debt management

[lee9786]

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I've estimated my total debt to be around 130k upon completion of a DPT degree. I've estimated my annual earnings to be ~80k working six days/week. Out of the 130k debt figure, 20-30k is estimated coming from private lenders. Any insight on payment strategies to manage this debt is appreciated. I have already accepted the fact I'll be living like I'm making 30k/year for five or so years with intent to pay the loans down.

My current plan is to pay down the private loans first. If at all possible pay this off in the first year to avoid interest accruing. I was wondering if there would be anyway to defer/forbear the govt. loans for a year while solely focusing on paying down the private lenders. Does anyone know if this is a viable option?

My guess is that if you are making a salary that seems adequate, then the defer/forbear option for govt. loans would not be an option. The next best thing would be to put all loans on a 25-30yr plan to minimize the required minimum monthly payment. I would then focus on paying down the private loans first but have to pay the minimum amount for the govt. loans. This could stretch the private loan burden out another year. I would then focus on paying down the govt. loans.The big concern is devising a strategy to pay down these private loans. I've heard plenty of stories in which these can get out of control quite quickly.

An other concept that I've heard but have not been able to verify is that the income used to pay down loans could have some tax benefit. Does anyone know anything about this?

Any insight in this process is appreciated.

 

[penguin24]

Re: the tax benefit

There is a tax break where up to $2,500 of interest that you pay on your student loans can be tax-deductible. This means that you subtract that amount from you pre-tax income, and thus are only taxed on the remainder. However, this tax break phases out at around $60K/yr single or $120K/yr married, so if you're making $80K/yr you may not be eligible for the tax break.

Here is the link: http://www.uic.edu/depts/financialaid/taxcredits.shtml

I agree to pay off your private loans first, but I don't know if you can really forebear/defer gov loans unless you have proof of 'hardship'. I suggest paying the minimum on gov & as much as you can on private loans.

 

[Mtloomis]

I've estimated my total debt to be around 130k upon completion of a DPT degree. I've estimated my annual earnings to be ~80k working six days/week. Out of the 130k debt figure, 20-30k is estimated coming from private lenders. Any insight on payment strategies to manage this debt is appreciated. I have already accepted the fact I'll be living like I'm making 30k/year for five or so years with intent to pay the loans down.

My current plan is to pay down the private loans first. If at all possible pay this off in the first year to avoid interest accruing. I was wondering if there would be anyway to defer/forbear the govt. loans for a year while solely focusing on paying down the private lenders. Does anyone know if this is a viable option?

My guess is that if you are making a salary that seems adequate, then the defer/forbear option for govt. loans would not be an option. The next best thing would be to put all loans on a 25-30yr plan to minimize the required minimum monthly payment. I would then focus on paying down the private loans first but have to pay the minimum amount for the govt. loans. This could stretch the private loan burden out another year. I would then focus on paying down the govt. loans.The big concern is devising a strategy to pay down these private loans. I've heard plenty of stories in which these can get out of control quite quickly.

An other concept that I've heard but have not been able to verify is that the income used to pay down loans could have some tax benefit. Does anyone know anything about this?

Any insight in this process is appreciated.

I just tried to Forbear my Staffords from Lawschool. They are pretty tight about the hardship qualifications. Your monthly obligation must be more than 20% of you gross income.

 

[lee9786]

I just tried to Forbear my Staffords from Lawschool. They are pretty tight about the hardship qualifications. Your monthly obligation must be more than 20% of you gross income.

I figured if I stuck with the ten year plan then the monthly student loan payment (govt. and private loans) would be greater than 20% of my monthly income. I wonder if it only takes into account govt. loans however. If so I think it still would be higher than 20% of gross income however if on the ten year plan. I wonder if I would still qualify for forbearance even though I'd be paying down the private loans. All I would need is one year to get the private loan monkey off my back. Thanks for the responses.