Author Topic: Maximizing Employer Student Loan Benefit  (Read 316 times)

mattydt20

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Maximizing Employer Student Loan Benefit
« on: July 29, 2020, 12:27:31 PM »
My future employer will pay 50k in student loan forgiveness over 4 years. I'm currently taking out loans in order to maximize this payment. If you pay the loans off in less than 4 years, they won't continue to give you the difference.

My friend said he took out 70k total, because the payments he will have to make on his own, which will extend him to the 4 year period. I'm guessing the company pays the student loan company directly as principle - rather than scheduled payment, which could push out your next due payment. I'm trying to figure out if it's actually worth it to take out 70k in loans in order to get paid 50k in total reimbursement. If I only take out 50k it sounds like it'll be paid off in 3 years

I'm trying to figure out the math on this, but I don't think I'm setting it up correctly. Can anyone provide some advice?

Thanks!

Peachtea

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Re: Maximizing Employer Student Loan Benefit
« Reply #1 on: July 30, 2020, 06:41:25 PM »
I question the strategy in general...as someone who is doing PSLF, so someone who generally thinks loan forgiveness programs are great, I would never have taken out loans for the purpose of them being forgiven. That said you’re already doing it/ weighed your decision, so just use a loan calculator. Enter your interest rate and loan term, then use the extra payment function which lets you select a once a year extra payment. Pick a random amount until you get the results you want...click the amortization schedule to see when your loans hit zero to figure out if it hits zero when you want it to. I.e. 70k at 4.5% and a 10 year term, with four 10k payment at the end of each year, gets you to zero in  4 years and 4 months.

https://www.bankrate.com/calculators/mortgages/loan-calculator.aspx

mattydt20

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Re: Maximizing Employer Student Loan Benefit
« Reply #2 on: July 31, 2020, 07:01:58 PM »
There it is! Nailed it. Thanks for your thoughts Peachtea!
288% return on investment for taking $47,000 in loans at 7%, and they provide 3 annual payments of $12,500. You don't maximize the $50k loan reimbursement they offer, but that's the sweet spot for ROI.