I owe about 100,000 dollars in federal student loans. I have six separate loans and 2 of them have 129 months of IBR credits. The other 4 have 69 months of IBR credits. I can’t qualify for PSLF.
I make about 40-45 thousand a year. My job will pay one month of my loan payments in the amount of about 2200 dollars. This should cover about one year of my payments under IBR.
I’m currently in the SAVE forbearance. I’m thinking about switching to IBR in January.
Should I try to find a second job that pays about 30,000 dollars a year and pay off the loans in about 3-5 years? Or should I hold out for forgiveness in about 20 years?
My partner makes over 100,000 dollars a year so we are financially stable. My partner favors the forgiveness route. I’m ok with waiting the 20 years unless I somehow get my hands on 100,000 dollars.
Any and all advice would be greatly appreciated
Posted by Fun_Apple9580
2 Comments
SHORT VERSION: I agree with your partner. You are wasting a shit ton of money if you try to pay off the loan faster
LONGER VERSION:
Your monthly payments must be really low if you are on IBR. Let’s say it’s $400 per month average over the next 10 years =521.429 weeks $48,000
Take the forgiveness route.
Let’s say you have $120,000 balance at the end
$120,000 * .24 after taxes * .80 depreciated value of dollar in 10 years = $23,000 in today’s dollars that you’ll owe on the loans in the tax bomb.
Overall you only have to pay about $65,000 in today’s dollars if you take the forgiveness route.
You can play with the numbers but overall take the IBR minimum payment route.
Separately I like your idea of having a second job, but for the purpose of maxing out a 401K and IRA, or even just a super safe 10 year treasury bond.
Fundamentally with federal loans your options are 1) aggressive repayment, 2) PSLF or similar employer based forgiveness programs, or 3) IDR plan based forgiveness.
If you’re looking solely at your income then yes owing double what you make is a scenario where IDR plan based forgiveness makes a lot of sense. If you and your partner were to get married (assuming you’re not) and merge finances then that is a different situation where (if you both agree to it) it might make sense for you two to work together to tackle your loans