Since you’ve already stated that the question is when, and not if, I will skip the advice/warnings and just say congratulations on your choice! Once I made up my mind to have a child, nothing could have or would have dissuaded me. Speaking my truth, and coming from a marriage with deep cultural differences, I have often felt that many aspects of raising my daughter would be easier (for me) without a partner. My point is that IF you have a strong family and friend network, and IF you have adequate financial resources, some aspects of raising a child may actually be easier without a partner (no arguing over parenting strategy or how to maintain the household!).
It sounds like you are feeling pressure to make a big decision regarding your student loans. Here are a few thoughts I had after reading your post.
1) I personally would make building a six month savings reserve a top priority in your circumstance.
2) I would budget high on child care expense as you just don’t know how you are going to feel once baby comes. Quality care is often expensive, although sometimes you do get very lucky; budget high.
3) With regards to the refinancing of your school loans, the difference between the two options you presented is 2.5%, which amounts to about $8K in interest over five years. While this isn’t nothing, at $2K+ a month we are talking about a few extra months. Now if you don’t stick with the five-year plan, this becomes a different scenario. Does the length of time you have to repay shorten when you refinance? You may not want to lock yourself in to higher payments, rather keep it as optional to give you more flexibility. I wonder how realistic it is for any legislative changes to pass and be implemented in the next five years. If it is unlikely, and the payback period doesn’t shorten, go for the refinance.
With $80K in net pay (assuming you mean after tax withholding and deductions), you have $6,666/mo. Considering your current $3K in monthly living expenses (including $800 SL pmt), you have $3,666/mo leftover once you’ve built your savings reserve. On paper it would seem you squarely have enough to cover daycare @ $1,200/mo (see point 2 – at least double your number) and throw an additional $1,500 (for a total SL pmt of $2,300/mo**) on your student loans, and still have almost $1K/mo left. If you refinance, you would have $150 more per month leftover.
Hopefully I’ve understood your assumptions correctly, but on paper both seem doable. Additionally, keeping your loan financing as is @ 6.5% over refinancing at 4% doesn’t seem to make or break your ability to do both. Feel free to provide additional details if you’d like the forum to keep chipping away at the numbers piece of your question.
Of course I have to add in my one piece of advice based on my own personal experience: go used, and minimalist for all baby items where it makes sense to do so. It all seemed so important to me when I was buying it, and in hind sight I could have saved 75% of our overall spending through borrowing, buying used, and just going with less. And whatever you do, don’t buy cute denim overalls for a baby. Sheesh! All you need are some soft onesies, some warm sleepers, and a few soft blankets (for clothing). Let your friends and family buy the pricey stuff, if they are so inclined.
Good luck to you!!!!
**P.S. When I plugged your numbers into my Tvalue software (student loan balance @ $117K, 6.5% interest rate, and a $3K/mo payment), it spit out 44 months (3 yr 8 mo) as the time to payoff. I made an assumption of a five year pay-off, as stated, which brings the monthly payment down to $2,300 @ 6.5%. If you are already paying $800, you would only need to add $1,500/mo to pay-off in five years.