Married Loan Repayment Advice

[coffeeclothesaddict]

I am graduating med school this year with ~350,000 in student loans (federal direct unsubsidized and direct grad plus loans). I am married to a high income earner with annual income ~150,000 and likely to increase over residency. For this reason, if I choose the REPAYE repayment plan, (which it doesn't matter if we do married filing separately or jointly, still takes into account our combined income) my monthly payments are extremely high. We live in in the North East (high cost city). I am going into Internal Medicine and planning on completing a 3 year fellowship. Therefore, I would like to take advantage of PSLF if still available in 10 years.

What options do I have as far as loan repayment plans? From what I understand we can choose married filing separately and do either PAYE (starting payment $350) or IBR (starting payment $530) plans which will then take into account only my income. However, we will have a large yearly tax increase ~10,000+ a year. Otherwise, I will have to do married filing jointly and have extremely high payments, but still do the PAYE plan (starting payment 1300). Either way will still try for PSLF (given 6/10 years in training at an eligible hospital).

Any advice is greatly appreciated!

---

Members don't see this ad.

 

[SigmaFS]

Thought I would share what I posted on White Coast. Also, you can switch from one IDR plan to another. The concern with switching IDR plans is interest capitalizes, but not relevant if you are pursuing PSLF.

If your MFJ AGI is as follows, here's an estimate of REPAYE monthly payment and interest subsidy:

• 2017 AGI = $150k REPAYE payment ~ $1,050/month with a $5,100 interest subsidy in 1st year. Ending balance after year 1 in REPAYE ~$355,100
• 2018 AGI = $180K REPAYE payment ~ $1,290/month with a $3,600 interest subsidy in 2nd year. Ending balance ~ $358,700
• 2019 AGI = $210k REPAYE payment ~ $1,535/month with $2,170 interest subsidy in 3rd year. Ending balance ~ $361,000

REPAYE mitigates the interest accrual reducing the outstanding balance and allows you to file jointly reducing your tax liability. Probably the more conservative path if you're uncertain about PSLF.

PAYE assuming MFS to exclude spouse's income:

• 2017 AGI = $0 PAYE payment = $0/month with no subsidy. Ending balance after year 1 ~ $372,750
• 2018 AGI = $30k PAYE payment = $41/month. Ending balance after year 2 ~ $395,009
• 2019 AGI = $60k PAYE payment = $285/month. Ending balance after year 3 ~ $414,340

PAYE MFS reduces the month payment, but increases your tax liability. I would probably select PAYE if I were confident in pursuing PSLF. Is it a 3 residency plus 3 year fellowship? Then requiring 4 years of qualifying employment.

If you select either PAYE or REPAYE, I'd probably consolidate immediately after MS graduation and before starting residency. This because you can report zero income and start the clock on PSLF soon than waiting until after your grace period.

Refi - Let's assume you refi immediately securing a 4% fixed rate with a 15 year term. Payments ~ $2,590/month. Interest rates are raising, so they may not be as competitive in 1, 2, 3+ years. But, who can predict the next financial collapse.

 

[Trogghunter]

I am graduating med school this year with ~350,000 in student loans (federal direct unsubsidized and direct grad plus loans). I am married to a high income earner with annual income ~150,000 and likely to increase over residency. For this reason, if I choose the REPAYE repayment plan, (which it doesn't matter if we do married filing separately or jointly, still takes into account our combined income) my monthly payments are extremely high. We live in in the North East (high cost city). I am going into Internal Medicine and planning on completing a 3 year fellowship. Therefore, I would like to take advantage of PSLF if still available in 10 years.

What options do I have as far as loan repayment plans? From what I understand we can choose married filing separately and do either PAYE (starting payment $350) or IBR (starting payment $530) plans which will then take into account only my income. However, we will have a large yearly tax increase ~10,000+ a year. Otherwise, I will have to do married filing jointly and have extremely high payments, but still do the PAYE plan (starting payment 1300). Either way will still try for PSLF (given 6/10 years in training at an eligible hospital).

Any advice is greatly appreciated!

interesting predicament, I did not and will not do the numbers for you re what you'll pay with each plan if filing separately or individually, but consider these points:

You can deduct your interest paid toward loans on a tax return (as an individual at least) if your salary is <80K. I do not know what it is for joint filing, but you should look that up. Deductions for next year will be larger, I think, so look at the big changes in the tax bill. If you both file individually and get the maximum standard deduction, it may be in your benefit.

If you're going for PSLF, you should start paying your loans down as soon as you possibly can to count toward the 120 payments. I am not sure if that program will be around, however, and I would not count on it.

 

[NITRAS]

You are going to make $200k a year while in residency/fellowship and easily twice that afterwards........

You should be able to make it, but it looks like you’ll be paying most of the bill. Personally, I wouldn’t count on PSLF.

 

[coffeeclothesaddict]

You are going to make $200k a year while in residency/fellowship and easily twice that afterwards........

You should be able to make it, but it looks like you’ll be paying most of the bill. Personally, I wouldn’t count on PSLF.

Thanks for your response. I understand that, seeking advice on which repayment pathway is best in order to acquire the least interest over the repayment years i.e. REPAYE or PAYE or refinance. Not banking on PSLF being around either. def agree

 

[coffeeclothesaddict]

Thought I would share what I posted on White Coast. Also, you can switch from one IDR plan to another. The concern with switching IDR plans is interest capitalizes, but not relevant if you are pursuing PSLF.

If your MFJ AGI is as follows, here's an estimate of REPAYE monthly payment and interest subsidy:

• 2017 AGI = $150k REPAYE payment ~ $1,050/month with a $5,100 interest subsidy in 1st year. Ending balance after year 1 in REPAYE ~$355,100
• 2018 AGI = $180K REPAYE payment ~ $1,290/month with a $3,600 interest subsidy in 2nd year. Ending balance ~ $358,700
• 2019 AGI = $210k REPAYE payment ~ $1,535/month with $2,170 interest subsidy in 3rd year. Ending balance ~ $361,000

REPAYE mitigates the interest accrual reducing the outstanding balance and allows you to file jointly reducing your tax liability. Probably the more conservative path if you're uncertain about PSLF.

PAYE assuming MFS to exclude spouse's income:

• 2017 AGI = $0 PAYE payment = $0/month with no subsidy. Ending balance after year 1 ~ $372,750
• 2018 AGI = $30k PAYE payment = $41/month. Ending balance after year 2 ~ $395,009
• 2019 AGI = $60k PAYE payment = $285/month. Ending balance after year 3 ~ $414,340

PAYE MFS reduces the month payment, but increases your tax liability. I would probably select PAYE if I were confident in pursuing PSLF. Is it a 3 residency plus 3 year fellowship? Then requiring 4 years of qualifying employment.

If you select either PAYE or REPAYE, I'd probably consolidate immediately after MS graduation and before starting residency. This because you can report zero income and start the clock on PSLF soon than waiting until after your grace period.

Refi - Let's assume you refi immediately securing a 4% fixed rate with a 15 year term. Payments ~ $2,590/month. Interest rates are raising, so they may not be as competitive in 1, 2, 3+ years. But, who can predict the next financial collapse.

Thanks! Not sure why it got deleted before. Really helpful info

 

[sinemej]

Thought I would share what I posted on White Coast. Also, you can switch from one IDR plan to another. The concern with switching IDR plans is interest capitalizes, but not relevant if you are pursuing PSLF.

If your MFJ AGI is as follows, here's an estimate of REPAYE monthly payment and interest subsidy:

• 2017 AGI = $150k REPAYE payment ~ $1,050/month with a $5,100 interest subsidy in 1st year. Ending balance after year 1 in REPAYE ~$355,100
• 2018 AGI = $180K REPAYE payment ~ $1,290/month with a $3,600 interest subsidy in 2nd year. Ending balance ~ $358,700
• 2019 AGI = $210k REPAYE payment ~ $1,535/month with $2,170 interest subsidy in 3rd year. Ending balance ~ $361,000

REPAYE mitigates the interest accrual reducing the outstanding balance and allows you to file jointly reducing your tax liability. Probably the more conservative path if you're uncertain about PSLF.

PAYE assuming MFS to exclude spouse's income:

• 2017 AGI = $0 PAYE payment = $0/month with no subsidy. Ending balance after year 1 ~ $372,750
• 2018 AGI = $30k PAYE payment = $41/month. Ending balance after year 2 ~ $395,009
• 2019 AGI = $60k PAYE payment = $285/month. Ending balance after year 3 ~ $414,340

PAYE MFS reduces the month payment, but increases your tax liability. I would probably select PAYE if I were confident in pursuing PSLF. Is it a 3 residency plus 3 year fellowship? Then requiring 4 years of qualifying employment.

If you select either PAYE or REPAYE, I'd probably consolidate immediately after MS graduation and before starting residency. This because you can report zero income and start the clock on PSLF soon than waiting until after your grace period.

Refi - Let's assume you refi immediately securing a 4% fixed rate with a 15 year term. Payments ~ $2,590/month. Interest rates are raising, so they may not be as competitive in 1, 2, 3+ years. But, who can predict the next financial collapse.

Thanks!

 

[dpmd]

With that kind of household income you might want to look at what refinancing with sofi or similar lenders could save you with a lower interest rate. They have different term options so you could do a long term immediately after graduation then step up the payments as you earn more money. Letting the interest build up and hoping for PSLF doesn't seem worth it to me especially since I wouldn't want to limit my job options because I spent 6 yrs letting loans pile up when we were making plenty of money.

 

[DoctwoB]

Think of it as an equation. One one side is higher tax burden plus lower loan payments plus limited career flexibility. On the other is low tax but high loan payments and improved flexibility. Also don’t forget that pslf is taxable, meaning that the final equation would be

Increase in tax burden - decrease in loan payments +pslf taxes - value (to you) of loss in career flexibility/risk of depending on pslf = ?

Fill in the numbers yourself. The value of flexibility is highly personal and no one can answer that for you. If you do go away from pslf then agree with checking loan refinance rates as that may be worthwhile

 

[BorntobeDO?]

Think of it as an equation. One one side is higher tax burden plus lower loan payments plus limited career flexibility. On the other is low tax but high loan payments and improved flexibility. Also don’t forget that pslf is taxable, meaning that the final equation would be

Increase in tax burden - decrease in loan payments +pslf taxes - value (to you) of loss in career flexibility/risk of depending on pslf = ?

Fill in the numbers yourself. The value of flexibility is highly personal and no one can answer that for you. If you do go away from pslf then agree with checking loan refinance rates as that may be worthwhile

pslf is not taxable currently, that is its biggest advantage.

 

[coffeeclothesaddict]

Update: I'm leaning towards not doing PSLF. I feel like it doesn't make sense in my situation, and I do highly value job flexibility especially after 6 years or training!! I want to be able to work for a private practice if I get a good job offer in 6 years without being pulled to work for a hospital /non profit due to accrued interest. Thanks for all your advice! super helpful I'm going to start off in REPAYE and will most likely refinance within the first year if I can get a good rate.

 

[NITRAS]

Good luck!