Bronx Bum wrote: Total Litigator wrote:
Bronx Bum wrote:Debt: $190k
Plan: Don't even know, just deferred another year.
...Why are you deferring instead of getting on IBR or PAYE?
Not eligible for PAYE. What's the point of IBR at this point? So I can get tax bombed in 25 years? Don't want to consolidate anyway.I'm just throwing money at it trying to keep it at $190k (jfc it increases like $80 a day lol) until my salary increase to $68k once I'm admitted then do all I can do to pay it down.
IBR is really the worst option you can have. It's 25 years at 15% and you are going to get MURDERED by the tax bomb at the end. In 25 years the total will be like $500k if I IBR. Also, once you get married it's 15% of both salaries. Might as well hit the bottle for a while, keep it at bay, then man up and pay it.
Meh, I had the same thought process as you... but IBR is really the way to go.
I have about as much debt as you do, and a similar salary. If I suddenly win a proverbial / actual lottery, sure I will pay off my loans. But intending to repay the $190k later, while $10K+ in interest stacks up per year is not really a constructive plan.
Also, your first year IBR payments should be based on your 3L earnings, so you will likely knock off 1 year off of the 25 years without having paid anything anyways.
Furthermore, at around $190K per year, under the 25 year straight payment plan, that is about $1,500 a year for 25 years anyways (thank interest for that).
Also, if you want to overpay, IBR allows you to focus your payments on the high interest loans after you make your IBR payment, so it will actually save you money as long as your basic plan is to pay back your loans one way or another.
Finally, with regards to the tax bomb, putting money saved via IBR in a 'tax bomb preparation' account is more effective than putting that money towards your loans if you are not able to reduce the principle. Also, remember than the principle does not capitalize on IBR. Your ultimate loan forgivement amount, assuming Congress doesn't void the tax bomb in the next 25 years, will be taxed at about 33%. Therefore (for example) if you put $100K in a 'tax bomb preparation account' for an ultimate loan forgiveness amount of $300K, you will still spent less money than you would have paying it back in full. (I haven't done the actual math here, but it'd be tough to beat having to pay back 'only' 33% of the final unpaid amount versus having paid it back on a 25 year payment plan with interest stacking but no capitalizing priniciple).