questions about trump's student loan plan

[asian pharm]

Lol, good luck with having your loans forgiven. Below is a list of all promises made. He might consider student loans after Mexico pays for the wall.

I graduated with almost $230k in 2015. Down to ~$127k.

‘I will give you everything.’ Here are 282 of Donald Trump’s campaign promises.

I see.....OK.....so after so many of you have given your feedback on my original question....the take home message for me to pay it off as soon as I can.Correct? So here is the scenario then.
Well, I have 72K income before taxes rite now, and 80K in savings, and 190k in loans. If I pay off all that 80K (no emergency fund left), then I will be down to 110K. And then pay off this 110K with 10 Year regular installments?

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[asian pharm]

I see.....OK.....so after so many of you have given your feedback on my original question....the take home message for me to pay it off as soon as I can.Correct? So here is the scenario then.
Well, I have 72K income before taxes rite now, and 80K in savings, and 190k in loans. If I pay off all that 80K (no emergency fund left), then I will be down to 110K. And then pay off this 110K with 10 Year regular installments?

Forgot to mention this: Thanks to all of you who responded. I appreciate your time and feedback!

 

[rxdawg21]

Forgot to mention this: Thanks to all of you who responded. I appreciate your time and feedback!

I personally would keep 6 months expenses saved up (whatever that may be for you (probably 12-18k)) and put the rest on my loans. I would then immediately refinance my loan into a 5 year term, that forces you to pay off the 120-130k balance in 5 years (looking at 2200 per month minimum). You could of course pay extra (3600 per month you are looking at 3 year payoff)

 

[iggles]

Hey op I'm in a very similar situation to you. 310k in debt (undergrad+grad at expensive private schools). I just graduated and haven't started making payments yet although I just landed my first job in the pharma industry as well (78k pretax). I would look to see if you qualify for PAYE or REPAYE. These plans cover most types of federal student loans except parent plus loans. While on these programs you are capped at 10% of your adjusted gross income minus ~12k for loan repayment that year. I would open a traditional IRA (I opened a vanguard account) and contribute the max $5500. Also contribute to your 401k at least as much as the company will match (max you can contribute is around 18k I believe). Both of these retirement accounts will lower your AGI that is used to calculate how much you have to repay on your student loans that year. Now if you're looking to buy a home you can withdraw money from your traditional IRA and 401k for a down payment. As it currently stands after 20 or 25 years (depending on which plan you qualify for) the forgiven amount will be taxed as income. There are paye and repaye calculators that'll help you figure out what your monthly payments would be. Assuming I get a 5% yearly raise which would increase how much I have to pay back on my loans and adding in the tax implications in 20 years (I'll be paying roughly 35% on the forgiven amount) I still come out ahead compared to a 10 year repayment plan. This isn't even including the appreciation I would have accumulating in my retirement accounts for all those years. Btw you can also withdraw from your traditional IRA account in case you want to go back to school and get an MBA which I plan on doing. Take advantage of your freed up monthly income and open a regular brokerage account and start investing (if you're a lazy investor like myself just park your money in some ETFs that track a large number of companies). You can withdraw from your brokerage account anytime without penalty (although you'll will be paying capital gains tax) and pay down on your large tax bill when the time comes. Anyways I know its scary walking around with all that debt + the added uncertainty of the future of these repayment plans so you're going to have to do some soul searching and number crunching to see if this is the right move for you. Good luck op!

 

[Amphetamine Salts]

Hey op I'm in a very similar situation to you. 310k in debt (undergrad+grad at expensive private schools). I just graduated and haven't started making payments yet although I just landed my first job in the pharma industry as well (78k pretax). I would look to see if you qualify for PAYE or REPAYE. These plans cover most types of federal student loans except parent plus loans. While on these programs you are capped at 10% of your adjusted gross income minus ~12k for loan repayment that year. I would open a traditional IRA (I opened a vanguard account) and contribute the max $5500. Also contribute to your 401k at least as much as the company will match (max you can contribute is around 18k I believe). Both of these retirement accounts will lower your AGI that is used to calculate how much you have to repay on your student loans that year. Now if you're looking to buy a home you can withdraw money from your traditional IRA and 401k for a down payment. As it currently stands after 20 or 25 years (depending on which plan you qualify for) the forgiven amount will be taxed as income. There are paye and repaye calculators that'll help you figure out what your monthly payments would be. Assuming I get a 5% yearly raise which would increase how much I have to pay back on my loans and adding in the tax implications in 20 years (I'll be paying roughly 35% on the forgiven amount) I still come out ahead compared to a 10 year repayment plan. This isn't even including the appreciation I would have accumulating in my retirement accounts for all those years. Btw you can also withdraw from your traditional IRA account in case you want to go back to school and get an MBA which I plan on doing. Take advantage of your freed up monthly income and open a regular brokerage account and start investing (if you're a lazy investor like myself just park your money in some ETFs that track a large number of companies). You can withdraw from your brokerage account anytime without penalty (although you'll will be paying capital gains tax) and pay down on your large tax bill when the time comes. Anyways I know its scary walking around with all that debt + the added uncertainty of the future of these repayment plans so you're going to have to do some soul searching and number crunching to see if this is the right move for you. Good luck op!

what about someone who has 150k debt in their name and 150k on their parent's through parentplus? i heard there are options for parent plus that are similar to PAYE where you make income based payments for 25 years and it's forgiven. i was thinking i would have my dad do that on the loans so the minimum amount drops from 1.1k to perhaps a few hundred. this would give me financial flexibility since i have lower minimum loan payments and allows me to focus my extra income on my loans to pay them off quicker. then afterward work on his loans. i'm not sure whether this is beneficial compared to paying minimum on both loans with no income plan

 

[Ace41690]

I don't understand people who bash REPAYE or PAYE. Say you have 200k in debt and are making 120k a year. You want to pay 2k+ a month on standard plan for 10 years or like 700 a month on repaye? Sorry I didn't bust my a$$ with all this higher education nonsense so i could take home 3k/month. I'd like to enjoy my money and life before im old and wrinkled and on 14 medications. These repayment plans are created off the assumption you will get a 5% raise every year (hint: you wont). Account for this, inflation, and forgiveness at the end of the term. It doesnt come out thst different in totsl payment. The higher your debt, lower your income, and lower your annual raise the more these plans tip in your favor. You'd be stupid to not take advantage of these plans. Work at a hospital/nonprofit and it's even better.

 

[babybull]

I don't understand people who bash REPAYE or PAYE. Say you have 200k in debt and are making 120k a year. You want to pay 2k+ a month on standard plan for 10 years or like 700 a month on repaye? Sorry I didn't bust my a$$ with all this higher education nonsense so i could take home 3k/month. I'd like to enjoy my money and life before im old and wrinkled and on 14 medications. These repayment plans are created off the assumption you will get a 5% raise every year (hint: you wont). Account for this, inflation, and forgiveness at the end of the term. It doesnt come out thst different in totsl payment. The higher your debt, lower your income, and lower your annual raise the more these plans tip in your favor. You'd be stupid to not take advantage of these plans. Work at a hospital/nonprofit and it's even better.

Add in some periods of unemployment or part-time work and PAYE/REPAYE becomes a no brainer for those with lots of student loans.

 

[CYP-0]

I don't understand people who bash REPAYE or PAYE. Say you have 200k in debt and are making 120k a year. You want to pay 2k+ a month on standard plan for 10 years or like 700 a month on repaye? Sorry I didn't bust my a$$ with all this higher education nonsense so i could take home 3k/month. I'd like to enjoy my money and life before im old and wrinkled and on 14 medications. These repayment plans are created off the assumption you will get a 5% raise every year (hint: you wont). Account for this, inflation, and forgiveness at the end of the term. It doesnt come out thst different in totsl payment. The higher your debt, lower your income, and lower your annual raise the more these plans tip in your favor. You'd be stupid to not take advantage of these plans. Work at a hospital/nonprofit and it's even better.

Add in some periods of unemployment or part-time work and PAYE/REPAYE becomes a no brainer for those with lots of student loans.

That's part of what I'm saying. I truly don't see much wisdom in steroid-paying off student loans, except for those with relatively low balance....or some circumstance that makes it the most feasible option.

If you have up to $3k to unload on student loans/month with a typical RPh income alone, why not use an income-based option, and pump the difference into an investment portfolio. By the time you reach loan forgiveness, your investments should have accumulated enough compounded profits that will likely cushion the tax liability on loans forgiven. If you work for non-profit, you won't need to worry about the tax liability. This option is even more viable if the interests on your returns are higher than that of student loans'.

 

[PharmacistFl12]

That's part of what I'm saying. I truly don't see much wisdom in steroid-paying off student loans, except for those with relatively low balance....or some circumstance that makes it the most feasible option.

If you have up to $3k to unload on student loans/month with a typical RPh income alone, why not use an income-based option, and pump the difference into an investment portfolio. By the time you reach loan forgiveness, your investments should have accumulated enough compounded profits that will likely cushion the tax liability on loans forgiven. If you work for non-profit, you won't need to worry about the tax liability. This option is even more viable if the interests on your returns are higher than that of student loans'.

I thought about that plan but decided to go all out and payoff my student loans ASAP. You left out 3 critical factors that make this option a horrible idea: 1)Nothing is guaranteed in this world. I personally lost over $107k in stocks already. Can you guarantee there won't be any market crashes. Can you guarantee Congress won't decide to scrap loan forgiveness completely? Especially if federal government continue to increase the deficit. 2)Less free cashflow monthly and opportunity cost. That $700-$800 monthly payment that you extend for 20 years can be used for something much more appealing like paying towards mortgage, a boat, daycare and saving for children's college or even stock investing 3)Psychological freedom (most important factor). Having an overhand of debts can crush your morale. Is there anything worst than feeling "trap"? Having a stressful job (especially retail) and knowing you don't get to keep all of your hard earned salary is enough of motivation for me at least to get rid of student loans ASAP!

 

[PharmacistFl12]

I don't understand people who bash REPAYE or PAYE. Say you have 200k in debt and are making 120k a year. You want to pay 2k+ a month on standard plan for 10 years or like 700 a month on repaye? Sorry I didn't bust my a$$ with all this higher education nonsense so i could take home 3k/month. I'd like to enjoy my money and life before im old and wrinkled and on 14 medications. These repayment plans are created off the assumption you will get a 5% raise every year (hint: you wont). Account for this, inflation, and forgiveness at the end of the term. It doesnt come out thst different in totsl payment. The higher your debt, lower your income, and lower your annual raise the more these plans tip in your favor. You'd be stupid to not take advantage of these plans. Work at a hospital/nonprofit and it's even better.

With our salary (especially retail), you'll only need 3 years to knock of your student loans completely. Why not suffer for just 3 years and live the rest of your life in prosperity with no student loans worry. I highly doubt you'll get that old quickly in 3 years if you're in your 20s or early 30s.

 

[pezdispenser]

I thought about that plan but decided to go all out and payoff my student loans ASAP. You left out 3 critical factors that make this option a horrible idea: 1)Nothing is guaranteed in this world. I personally lost over $107k in stocks already. Can you guarantee there won't be any market crashes. Can you guarantee Congress won't decide to scrap loan forgiveness completely? Especially if federal government continue to increase the deficit. 2)Less free cashflow monthly and opportunity cost. That $700-$800 monthly payment that you extend for 20 years can be used for something much more appealing like paying towards mortgage, a boat, daycare and saving for children's college or even stock investing 3)Psychological freedom (most important factor). Having an overhand of debts can crush your morale. Is there anything worst than feeling "trap"? Having a stressful job (especially retail) and knowing you don't get to keep all of your hard earned salary is enough of motivation for me at least to get rid of student loans ASAP!

Yep, one thing I have learnt is that the best way to achieve a goal is to get motivated and to focus on it. Your actions will fall into place, but your methods don't actually matter that much as long as you are moving towards your goal. So keep it simple and stay dedicated to it.

PAYE is pretty much the opposite, akin to procrastination and kicking the can down the road. While they are trying to play around with the numbers, nothing is getting done and in fact their debts are growing through negative amortization. Plus, life happens, throwing even the best laid plans into awry.

 

[BMBiology]

Good debt = help you make money, you can afford to pay it off if something happened.

Remember..everyone has a plan until they get hit in the mouth.

You might think maxing out your 401 k is a good way to reduce your PAYE monthly payment. But if the economy goes in reverse and your hours got cut, you might need to tap your 401 k. Guess what would happen? Not only will you be cashing out your 401 k when the stock market is down, but you will also need to pay income tax and 10% penalty for early withdrawal.

The funny thing is your PAYE monthly payment might actually go up as a result because 401 k withdrawal is counted as income.

Something that is designed to save you money might actually cost you money. That is the problem with debt...not too many people understand it.


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[iggles]

Good debt = help you make money, you can afford to pay it off if something happened.

Remember..everyone has a plan until they get hit in the mouth.

You might think maxing out your 401 k is a good way to reduce your PAYE monthly payment. But if the economy goes in reverse and your hours got cut, you might need to tap your 401 k. Guess what would happen? Not only will you be cashing out your 401 k when the stock market is down, but you will also need to pay income tax and 10% penalty for early withdrawal.

The funny thing is your PAYE monthly payment might actually go up as a result because 401 k withdrawal is counted as income.

Something that is designed to save you money might actually cost you money. That is the problem with debt...not too many people understand it.


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If you have an emergency fund (3+ months of living expenses) set aside and also have money in a brokerage account I don't see why anyone would need to tap into their 401k. If a person's hours do get cut and they need to stay on top of their bills by selling off some investments in their brokerage account then their PAYE payments will still be roughly the same due to the AGI not changing much.

Due to my large loan balance, my lower starting salary, the very boom or bust nature of the pharma industry, and my high risk tolerance I came to the conclusion that the PAYE program was right for me. Three posters above mentioned three very different reasons for wanting to use the PAYE program: to have more free'd up cash to enjoy life while still young, being able to afford student loan payments while unemployed/working part time, and having free'd up cash to invest early on. The following 3 posters also gave some sound reasoning to pay off the balance ASAP. In the end there is no right or wrong way to handle student loans. After doing her due diligence the OP can decide if this path is right for her.

 

[BenJammin]

Pharmacists should not qualify for student loan forgiveness. Quit trying to gamble on the government's future and pay your debts, ya deadbeat.

 

[VA77]

I think over the next 10 years you will see tax incentives to lower student debt with student being able to offset purchases for homes, property, and other assets that grow the economy. Home ownership is the lowest for the millennial generation since great depression and more homes mean more tax revenue. Might be at the federal level or state level but at 1.5T and growing and loans taking more of individual income something has to give.

 

[babybull]

Pharmacists should not qualify for student loan forgiveness. Quit trying to gamble on the government's future and pay your debts, ya deadbeat.

Please just allow us to be smart about paying our debts. Repaye is real and is providing substantial relief to many pharmacy graduates.

 

[BenJammin]

Please just allow us to be smart about paying our debts. Repaye is real and is providing substantial relief to many pharmacy graduates.

I would have had a lot of relief if I had chosen the financially irresponsible decision to make the minimum payment. Instead I decided to not be a deadbeat, pay my bills, and now I can afford to buy stuff that REPAYE suckers won't be able to buy for the next 40 years.