Hello Mustachians!
I am very excited to have discovered this blog a few weeks ago. I started at the first post and finally caught up to present this week. I love it and am sharing the info and the blog with everyone I know (people are shockingly unaccepting but I'll keep educating them :).
I am newly married and we have some options with our finances, so I am looking for some intelligent advice… what better place than MMM forums? I am married and we make a fair income - $120k pre tax, each earning $60k. I have $59k in student loans at 5.0% fixed, my wife has $75k in student loans at 6.8% fixed. We currently rent an apartment but we would prefer a house sometime in the next 1-3 years (not necessary but it is such a good time to buy right now due to historically low interest rates and good prices).
I currently have $25k in a Roth IRA (I worked before I went back to grad school), she has $5k in a Roth IRA. We are funding our 403(b) employer sponsored retirement plans (equivalent to 401k but for non-profit) to maximize employer match.
We both work for non-profit institutions and will qualify for the public service loan forgiveness program as we are on the income based repayment plan. Currently her loan payment is $608 per month, mine is $483 per month. If:
-We remain on this repayment schedule, and
-We remain employed at our non-profit institutions for 9.5 more years, or if we change jobs remain at a nonprofit, and
-The government does not change the laws,
Then our remaining student loan balance will be forgiven with no taxes under the public service student loan forgiveness program in 9.5 years.
Total loan repayment under this scenario, if our income does not change significantly (which would change our payments):
Wife: $69312
Me: $53124
Our careers are such that we cannot expect any large raises year to year, only 2-4% annual raises so I don’t think the payment will go up much, but you never know.
The alternative is maxing out our loan payments over the next 4 years to pay off our student loans. I believe our total repayments would be roughly around:
Wife’s student loans (we’d pay first due to higher interest): $80,000
My student loans: $64,000
Here are my questions.
-Should we save 20% in the next year and then purchase a home and shoot for the loan forgiveness (keep paying loan minimums)?
-Should we direct all our cash at our student loans and pay them off in 4-5 years before buying a house?
-Or split the difference, pay off her loans only then maybe save for a house and hope for forgiveness on my loans (this is my current plan)
-If repaying her loans, Should I take all the money out of the Roth IRAs and put toward her loans? Should I stop contributing to the Roth IRAs to accelerate loan repayment?
What would you do Mustachians? Am I missing anything?
Thanks for reading! Your time and your feedback are greatly appreciated!