What would you do?

[DaFace]

My wife just finished up her master's degree, and now we're figuring out our strategy for retirement planning and getting rid of student loans. We've got a kind of weird decision to make, so I'm curious how the Planet's financial minds would tackle it.

The crux of the issue is that she will most likely be able to get up to $17,500 of her $25,000 in student loans forgiven in five years since she's 1) a special ed teacher and 2) in a low-income school. However, we'd more than likely be able to pay it off well before then if we really wanted to. So, in a nutshell, here's the decision (over-simplified to make the discussion simpler):

Option 1: Pay off $17,500 in loans over the course of about two years. Zero chance of anything happening with the government that would compromise this option. We'd pay about $1,200 in interest during that time, for a total "payout" of $18,700 or so.

Option 2: Let it sit there for five years, then apply for loan forgiveness. We'd have to cover all of the interest above the $17,500 during that time, which is worth somewhere around $7,500 over five years, but that would be the total payout - a "benefit" of around $11,200 to our bottom line. However, 1) you never know what the government will do with these programs with all the spending cuts that are coming and 2) it sucks to carry debt when you don't have to. Technically, it also requires that she keep teaching for five years, but I don't see that being an issue.

I know the way I'm leaning, but am just curious to know what the financial advisors of ChiefsPlanet (heh) have to say.

(And too bad R8ers isn't here. )

[ThatRaceCardGuy]

My fiance just graduated from KU with her Masters ( and a 4.0) She is working for the state in a low income area , and in return her student loans are being partially paid off from the government. Its a good deal because her services are greatly needed in the neighborhood she and I grew up in.

[wazu]

Originally Posted by DaFace

Yeah, no arguments there. I just keep going back and forth on the issue. As I've mentioned, the numbers pretty clearly say that I should just wait. But the time will come here pretty shortly where I am $17,500 away from being able to say I'm debt free (aside from the mortgage), and I know it's gonna grate at my nerves to have it sitting out there.

Just pay it and be done with it. There's so much value to just being "done" with all that garbage. Get there as fast as you can and enjoy it once you get there.

[Saul Good]

Originally Posted by Thatguy

My fiance just graduated from KU with her Masters ( and a 4.0) She is working for the state in a low income area , and in return her student loans are being partially paid off from the government. Its a good deal because her services are greatly needed in the neighborhood she and I grew up in.

Wow.



































That had nothing to do with anything.

[Saul Good]

Originally Posted by Wazu

Just pay it and be done with it. There's so much value to just being "done" with all that garbage. Get there as fast as you can and enjoy it once you get there.

There's even more value in knowing that you've got the $17,500 sitting in an account in case you need it and then not needing it.

[DeezNutz]

The answer is option two, and it's not even close.

[AndChiefs]

Originally Posted by Saul Good

Wow.







That had nothing to do with anything.

She got the 4.0. Not him.

[wazu]

Originally Posted by Saul Good

There's even more value in knowing that you've got the $17,500 sitting in an account in case you need it and then not needing it.

It's a slow build to $11,200. Oh, and he gets to deal with creditors for the next five years harassing him. And a destroyed credit rating. (Note: this may not be important unless there are job opportunities that require a credit/background check.) And at the end of it all he would be counting on nobody changing the "forgiveness" rules.

No thanks. If you can shed that monkey, then do it.

They 1099 you for the forgiveness part in 5 years? That's another cost to consider into the issue.

[cdcox]

Originally Posted by DaFace

I know it's gonna grate at my nerves to have it sitting out there.

My nerves could take a lot of grating for $11K.

[Saul Good]

Originally Posted by Wazu

It's a slow build to $11,200. Oh, and he gets to deal with creditors for the next five years harassing him. And a destroyed credit rating. (Note: this may not be important unless there are job opportunities that require a credit/background check.) And at the end of it all he would be counting on nobody changing the "forgiveness" rules.

No thanks. If you can shed that monkey, then do it.

My wife owes about $20K. She's 2 years into the 5 year deal that will pay back $17,500 of it. I've got that sitting in an account drawing a little interest while we make the payments on time.

If she decides to change careers or stop working, the money is there to pay it all off. Otherwise, she gets $17,500 in 3 years, and we pay off the loan.

There's no harassment. My credit is 800+, and hers is in the upper 700s. The only possible reason to pay it off would be if you were worried about the government reneging on the deal, and you wanted to avoid 5 years of interest on the debt by paying it off early.

I'm not worried about that, and the interest is 2.25% on my wife's loans. (It sounds like it's higher for Phobia's, but I don't know that for certain.) Either way, it sounds like he's working on other debts as well.

At the very least, he should move this one to the bottom of the stack and focus on the other debts first.

[Saul Good]

Originally Posted by Phobia

They 1099 you for the forgiveness part in 5 years? That's another cost to consider into the issue.

I haven't looked into it, but I would assume so.

[wazu]

Originally Posted by Saul Good

My wife owes about $20K. She's 2 years into the 5 year deal that will pay back $17,500 of it. I've got that sitting in an account drawing a little interest while we make the payments on time.

If she decides to change careers or stop working, the money is there to pay it all off. Otherwise, she gets $17,500 in 3 years, and we pay off the loan.

There's no harassment. My credit is 800+, and hers is in the upper 700s. The only possible reason to pay it off would be if you were worried about the government reneging on the deal, and you wanted to avoid 5 years of interest on the debt by paying it off early.

I'm not worried about that, and the interest is 2.25% on my wife's loans. (It sounds like it's higher for Phobia's, but I don't know that for certain.) Either way, it sounds like he's working on other debts as well.

At the very least, he should move this one to the bottom of the stack and focus on the other debts first.

Okay, stand corrected on that part, then. I have heard of companies making a business out of collecting on student loans just like they would credit cards. Maybe some of that has changed with the recent overhaul to credit rules. Surprised it doesn't affect credit rating, though.

[DaFace]

Originally Posted by Wazu

It's a slow build to $11,200. Oh, and he gets to deal with creditors for the next five years harassing him. And a destroyed credit rating. (Note: this may not be important unless there are job opportunities that require a credit/background check.) And at the end of it all he would be counting on nobody changing the "forgiveness" rules.

No thanks. If you can shed that monkey, then do it.

Not sure where the creditors stuff came in here. I'm not talking about passing on required payments. In fact, to de-simplify it a bit, it's currently sitting at $25k with a $200 minimum monthly payment. By my calculations, if we just pay that minimum for 5 years, it'll be sitting at around $17.5k.

Like Saul Good, my credit's at around 800, and the wife is at around 785. We're not in trouble of screwing up here. It's purely a matter of what the best approach is for the situation.

[DaFace]

Originally Posted by Phobia

They 1099 you for the forgiveness part in 5 years? That's another cost to consider into the issue.

I wouldn't think so, but I'm not sure of that. Good point, though.

[Saul Good]

Originally Posted by Wazu

Okay, stand corrected on that part, then. I have heard of companies making a business out of collecting on student loans just like they would credit cards. Maybe some of that has changed with the recent overhaul to credit rules. Surprised it doesn't affect credit rating, though.

Nothing is changed. You keep paying the monthly payment during those 5 years, so there is no reason for collectors to call. The question isn't whether or not he should stop paying. The question is whether he should just pay the whole thing off and be done with it.