Save Plan

[iridocyclitiss]

Hi everyone
I had a quick question about SAVE plan and just strategies to pay off my loans.

I have about 68k in loans, have free rent due to my spouses job and pay pretty much the entirety of my paycheck to my loan. I should be done with my loan payments next year 2025. Not currently doing Save, paying a lot of interest each month.

I know the purpose of save is to eventually get loan forgiveness but imo there aren’t enough jobs that fit the loan forgiveness criteria to justify not paying it off.

I’m not investment savvy and so right now paying off my loan feels like a safer bet. More willing to invest and take risks once the debt is gone.

Could I use SAVE to stop my interest payments but still maximize my payments to get out of debt faster?

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[PMG03470]

First thing, loan forgiveness is not only PSLF. Any government loan can be forgiven after 25 years worth of payments. PSLF is just quicker (10 years) and agreed there are very few jobs that qualify for PSLF. With only 68k you are probably best to just pay it down now. Not sure what your income situation is. But with SAVE it doesn’t just get rid of all interest. What the SAVE plan does is if 10% of your income after calculation with dependents etc., is less than your overall interest charge each month the remaining unpaid interest disappears. The remaining interest does not capitalize which prevents runaway loans that grow and grow. If your interest each month is less than 10% of your income you are better off to just pay it down as fast as possible. I have 310k in debt and my SAVE monthly payments are 1,045. My interest otherwise would be about 1,600. So the 500 I don’t pay doesn’t add to my balance, it just goes away. Until my income grows this is the best plan for myself and my family.

 

[Feli]

It doesn't matter. You're done next year. You've won the game regardless. Congrats.
The interest is pretty minimal in just one more year on that low balance, and SAVE plan doesn't eliminate it (unless your income is ultra-low). This would be more worth doing the math on if you had substantial loans remaining or less ability to pay on them. But hey, congrats.

Just pay it off, free up that income/investing power, and then dump it into investments or big savings or a biz or whatever you like after 2025. There are obvious logical/math reasons to get debt-free, but also don't underestimate the psychological benefits. Changing jobs or a car accident or any unexpected expense is a lot less drama if you have BIG healthy savings and don't have many debts and payments to track (student loans payment, car payment, phone payment, credit card payment, whatever). I routinely buy cars, office equipment, insurance paid in full, and other stuff I could finance with just cash/debit to not have to deal with monthly payments... the 2% or whatever cash back to use credit card is also nowhere near worth it to then have payments to keep track of, jmo.

You should be doing Roth IRA (or backdoor trad>Roth) since that's a good post-tax growth acct that you can only do a limited amount of yearly ($7k/yr now), but it's fine paying everything else to debt. It is very easy to set that up... search WCI if you need. If you don't understand investing at all, just buy all VOO or VTI or similar low cost ETF index in your Roth for now... can always change it later on.

With only a year left, it hardly matters if you pay loans versus do 401/403/SEP/cash acct/etc this year or next, though. A guaranteed 8% return paying student loans is hard to reliably beat. I would read some books on index investing or stock picking if you haven't learned some of that, though. You will have serious invest power VERY soon, and you need to know what strategy you might want to try (indexing, self-directed, CFP manages it, etc). Kudos for slamming your loans out of training and not doing minimum loan pays while buying a nice car or house like most ppl do.

 

[Forcewielder]

Feli nailed it. You'll never regret paying off a loan too quickly. Don't let the math bother you too much as far as what could return you the greatest amount over x number of years or if your rate could be a couple percentage points better doing something else. I also agree with getting over to white coat investor and learn some basics. Personally I have a CPA because I don't trust myself anymore. I used to tinker with single stocks and I spent hours and hours researching things only to lose the majority of the time, culminating in a 10k loss when my total portfolio was still only 50k. I've found I am better at making money than investing it haha

Congrats again