Hi Everyone,
Thought I would put this one to the community. My partner and I are in our late 20s/early 30s and both graduated with some education loan debt. I'm on track to pay off my loans in 5 months, however she went back to grad school and has another $31,000 left. We both make in the 37K-42K per year range, no mortgage, one car loan of $8K (mine). Our savings are minimal as we try to get out of debt.
Because she went to school for and works in social work, she may be eligible for loan forgiveness after 10 years of public service. We are having a disagreement about it. Obviously it's her choice, but I have been encouraging her gently to do what I have been doing, which is to pay around $1,200/month (her graduate loans are about 6.2%) in which time she would pay them off in roughly 2.5 years. I am confident in this method because I was able to pay my $21,000 down to just $5,300 since last May, and it feels AMAZING to know I will be totally debt free in January or February of 2017 (not counting the car loan, which is only 2.9%).
My partner however does not like giving up this much every month, and since she is eligible, she wants to do the loan forgiveness thing. This involves waiting 10 years, making minimum payments that whole time, and then supposedly getting the whole debt forgiven after 10 years is up. I am skeptical of this loan forgiveness, and I have been using the following points to try to convince her this is a risky tactic.
1. Even if she is eligible and is "approved" for it, she will be getting charged interest over the 10 years and may end up paying almost the same amount in the long run vs. paying them off over 2.5 years. She would be doing "income-based" repayment over this time I am guessing...?
2. What if she becomes disabled, or changes careers to something not public service, which she has considered doing. Now she has her original amount plus whatever interest she's accrued over X number of years she's been making minimum payments.
3. What if laws change, or some other FUBAR craziness, over the next 10 years -- in short, what if ANYTHING happens to endanger her eligibility for this forgiveness, she is now screwed because she's been paying so slow for so long.
I realize that most people pay their loans over 10 years and that is totally normal and acceptable, but it's hard to wrap my brain around making the choice to pay them off quickly and forget about it, or have it hanging over my head for 10 years. I will support her in whatever she chooses to do, but I wanted to see if perhaps my logic on this is totally flawed, or if anyone has successfully done this?
Thanks in advance for your thoughts and advice!