student loan or invest

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I know this question has been asked before, but would like FW input. Here's my story in short. Graduated from graduate school 4 years ago, have 145K in student loans. Have been making payments for past 4 years, with past 3 years in income based repayment (15% of gross income). My wife recently graduated with her master's this December. She has 44K in student loans. Interest on loans 6.8%. We make 120K annual and currently making $1050 payment for student loans. I work with the federal gov and loan will be forgiven in 7 years and wife works for county, her loans will be forgiven in 10 years. Even after my loans are forgiven, would be making 15% of gross income due to wife's loan. I have been running some basic calculations and can't decide if I want to pay more in student loans, so both loans will be forgiven in 7 years or pay 15% for 3 extra years. The extra payment would be towards wife's loan to pay off in 7 years. If my calculations are correct, I would be paying approx $350 more each month, total difference would be $17.5K

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Without making my head explode I cannot imagine a scenario where the "forgiveness" should not be maximized at the lowest monthly payment possible until then.

I'm not familiar with the income based repayment plan, but are you saying that if married, 15% of combined income is supposed to go toward repayment, even if 1 spouse has no student loans left? In that case, I'd say it might be worth getting a divorce.

Income based repayment is based on both income if married, 15% of gross income. Yes even if only one person has student loan left. That is the dilemma. Divorce is not an option. What the dilemma is that if I pay more into wife's loan, loans will be done in 7 years. If not the clock starts over again when wife enters repayment for 10 years with past 3 years payment for nothing.

Let me see if I have this straight:

You have 7 years of IBR left - loans will be forgiven in 2020
She has 10 years of IBR left - loans will be forgiven in 2023
IBR will forgive a good chunk of your loans, but the last three years of her's the payments will be so high under IBR that you will pay her loan off anyway. You want to make extra payments on her loan now to save interest because IBR won't help her.

I think it would be advantageous to pay down her loan some so long as it doesn't affect the minimum payments on your own loan. How does IBR allocate what is paid to your loan versus to her's? Your interest payments are so high you likely don't get any tax benefit from the interest payments, so paying her's down some is a guaranteed 6.8% return. Additionally, if your income goes up by much you'll lose the deduction entirely.

IBR will allocate the percentage of her loan to both our loan total, so approx 25%. Extra payments won't affect my loans. Not much tax benefit I believe we can only claim 2500 max of interest. I figured if I make extra payments on her loans at least I will save the extra 3 years

Are you sure that your loans are Direct Loans (not FFELP)?

All direct loans

Pay off your loans please so my taxes don't go up!



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