First off, I want to say this is a vulnerable post, so please no shaming or anything unproductive. Secondly, my parents did not teach me about finances. They were poor examples of how to handle money effectively, which has led me to a large student loan debt for a Master's and Ph.D. Essentially, I owe $450,000, which is a wild amount. I know.
With that said, I am a 50-year-old woman with a combined income of $200,000 with my husband. I am trying to decide whether to pay them all off within 7-10 years at $5500 a month and be done paying $150,000 in interest, or use PAYE or IBR to pay $1600 a month, saving another $900 a month to avoid the tax bomb in 20 years.
My thoughts are that I will earn interest on what I save from the tax bomb, and I can still live comfortably. Or be absolutely broke for 7-9 years and then start saving.
Thank you in advance. I know this is not normal, and it was what I had to do as a single mother, hoping to make my life better for my son and me. I now see that was, at best, a bit delusional.
What Would You Do? Advice Needed
byu/TieNormal7138 inStudentLoans
Posted by TieNormal7138
6 Comments
I would turn the world upside down to get a PSLF qualifying job. Then pay the lowest monthly payment you can for 10 years. Even if that salary is lower, I bet you’ll save money, especially dodging the tax bomb.
I would pay $1600/mo and save for the tax bomb. At 50, retirement saving is hugely important, so being absolutely broke until you’re 59 isn’t really an option to gamble with.
Are these loans federal, private, or a combination of both?
I would do the lower payments and save for the tax bomb in your specific situation, just be sure you’re keeping that savings somewhere where you’re earning more than like .001% interest.
I think it depends on all the other savings outside of saving for the tax bomb. When you talk about “starting saving” in 7-9 years, do you mean you have no savings now? No judgement if so – it happens to lots of people. But if that’s the case, your safety net and retirement savings should be your first and second priorities, with student loans way behind that. There are non-profit organizations that have financial counseling, don’t have time to look them up right now, but they can really help. I didn’t learn this at home either, and nobody teaches you, so having somebody to talk to about your whole financial picture can be a big help.
When did you borrow your first loan? When did you enter repayment?
$5500/month for 9 years costs you just over $600k.