Author Topic: Student loan question  (Read 1606 times)

OnwardandUpward

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Student loan question
« on: September 03, 2018, 06:02:17 PM »
Hello all,

New here and have a question about student loans. I am 200K plus in fed student loan debt and am on an income driven plan w/forgiveness in 25. I'm about 10 in. Should I continue with the income driven and reduce my AGI by plowing the max into solo 401K and take the tax hit in 15 or should I pay it down aggressively instead of investing? Also, I think the AGI is what is used to calculate the income based plan, which would allow me to keep my payments low--I can check with them but does anybody know if this is the case? Also I am approaching 50 with little savings so far and that impacts my decision to consider the forgiveness option instead of taking four years to pay it off. Thanks!

Peachtea

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Re: Student loan question
« Reply #1 on: September 12, 2018, 08:24:32 PM »
1) Do you work for a nonprofit or gov agency where you can look into PSLF 10 year loan forgiveness with no tax hit at the end?

2) yes, 401k savings is very important at your age with little savings. But if your income is high enough to pay off 200k in 4 years, you probably can do both by paying off loans over more than 4 year but less than 15. What’s your retirement goal? Knowing your target amount and date will help you decide which route to go.

3) payments are 10 or 15% (depending on the plan) of your AGI - 150% of your states poverty line for your family size. Yes, contributing to 401k will lower your AGI and your payments.

4) There is no way to get around having to do the maths on forgiveness vs paying it off. Use the studentloan.gov repayment estimator to see how much you’ll have paid over 25 years and use the estimated amount forgiven to calculate what your tax hit will be at the end. https://studentloans.gov/myDirectLoan/repaymentEstimator

Compare that to how much you will pay if you pay it off in four years. It might be less to just pay it off. Alternatively, how does the income based total amount paid (with tax hit) compare to switching to a 10 year plan? Can you afford the 10 year plan payments and max out your 401k? Then you would be done with the SL payments in ten years and not worry about the tax consequences.

MrUpwardlyMobile

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Re: Student loan question
« Reply #2 on: September 13, 2018, 06:48:15 AM »
Hello all,

New here and have a question about student loans. I am 200K plus in fed student loan debt and am on an income driven plan w/forgiveness in 25. I'm about 10 in. Should I continue with the income driven and reduce my AGI by plowing the max into solo 401K and take the tax hit in 15 or should I pay it down aggressively instead of investing? Also, I think the AGI is what is used to calculate the income based plan, which would allow me to keep my payments low--I can check with them but does anybody know if this is the case? Also I am approaching 50 with little savings so far and that impacts my decision to consider the forgiveness option instead of taking four years to pay it off. Thanks!

There is a good question to ask here.  What is your income? What is your education (you have doctor/lawyer/dentist debt)?