I have roughly $24k left on my student loans and am currently on the Graduated Repayment plan.
I’m working to lower my monthly expenses as much as possible, so I can save and move out of my parents’ place- I am considering switching my plan to an income based plan (specifically was looking at REPAYE- maybe one of the other options make more sense?). My income is pretty low compared to others, and the calculator on the fedloan site says I’d start off paying nothing if I switched plans, which of course sounds great! From what I understand you get your loan refinanced over a 20 year time frame and then the remainder is forgiven… is it wise to bank on that happening or would that potentially put me in a bigger hole? Should I suck it up and keep the plan I’m on or will switching bring me the best benefit?
May 3, 2014
There are a ton of variables to consider here.
Standard forgiveness under REPAYE takes 20 years. That is a long time to let your student debt linger. The idea strategy will depend upon your income over the next 20 years. Will it stay the same? Will it be increasing?
Sometimes paying as little as possible and chasing forgiveness can end up being the more expensive option.
One option would be to get on REPAYE as soon as possible. You can still make payments like you were on the Graduated Repayment plan (or even pay extra), but you have the flexibility of lower monthly payments if you are short on cash. This move will also start the 20 year clock.
This article talks about Public Service Loan Forgiveness (which takes 10 years), but it has several different issues for you to consider when weighing the value of chasing forgiveness: https://studentloansherpa.com/dropping-income-strategy/
To make a huge generalization that might not be true in all cases, I would say this: If you don’t see how you are ever going to pay off 24k in student debt, chasing after forgiveness might be the best choice. If you can realistically see yourself paying it off after af few years of living with your parents, it might be better to just bear down and pay it off.
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