Folks, I am a tad bit overwhelmed with trying to figure out the best thing to do with my debt payments, while still investing, and also trying to figure out how to allocate new dollars from an unexpected raise (4K) a few months ago and another unexpected raise (3K) that will take effect in January.
My current take home is $3400, which already takes into account the $300/month I contribute to my 403(b). This is slightly above the employer match ($250/month).
I pay $1100/month on student loans. $395 on IBR for federal loans (amount tied to AGI from 2012). I hope to have the balance (90K) forgiven using Public Service Loan Forgiveness in 7 years. Therefore, it makes sense to pay as little as possible towards my federal debt, which means lowering my AGI.
The rest of that payment goes towards private student loans, of which I have two.
Loan 1: $51,448 (3.17%) - $258/month
Bar Loan: $6956 (3.92%) - $46/month
Total: $58,404 - $304 minimum monthly payment
Extra payments - $400/month
Total payment - $704/month
With my raises, my AGI is going to be going up. I don't want it to (but I DO), because for every extra dollar I make, there will be a ~.15 increase in my federal loan payment. So, with a 7K raise, roughly $88/month extra for a loan I will likely never repay in full.
I am guessing my January raise will bring my monthly take home pay in the $3550 range (if I don't change my 403(b) contributions). I want to concentrate on my private student loans, because the rate is variable and there is no forgiveness for those. In January, I plan to increase my private loan payment by at least $200/month for a total of $904. Once I build up my emergency fund (mid-2014), I will throw at least another $200/month towards my private loans.
So:
1. Do I increase my 403(b) contributions so as to a) build my stache and b) reduce my AGI to keep it where it is currently but c) leave me less to throw at private loans?
2. Do I lower my 403(b) contributions just to the point where I get the match, and just suck it up when my fed. student loan payment goes up, and throw all I can towards my private loans?
3. Some version of increasing 403(b) contributions slightly and having an increased fed. loan payment but not a huge increase in private student loan payment.
My monthly budget is about $2000. My austerity budget is around $1700. I am working up an emergency fund which is where my surplus is currently going. I have no other debt other than a 55K mortgage at 3.25%.
Thanks so much for reading this novel of a post. Sorry about that.
So, what would you do?