Orlandipo wrote:Well I think the idea is that you would invest that cash instead of using it for student loan payments, so I actually agree that you probably need to look at how much it's going to be worth post-tax to determine how much you're going to need to have at the end to offset ur tax bomb.
FWIW I have a spreadsheet I'm kindof basing my plan off of right now. My options are:
1. Pay off student loans at 25 year standard repayment plan, where total payments will be about $360,000 over 25 years.
2. Make PAYE payments. Assuming 7% increase in income for PAYE calc's. Also contribute $400 a month in some generic non-dividend paying investment portfolio for the next 20 years. Total combined payments for those two items over 20 years: $235,000. Additionally the investment account should be worth about $30,000 more than the tax from CODI assuming a 4.5% geometric return.
So overall I'm saving about 160k and on a five-year shorter timeline than standard repayment.
Your scenario is precisely what I was asking in my first post in this thread.
I think there is in fact a mathematical point where your debt is high enough that yes, investing the money instead of paying off your loans makes financial sense.
But, my amateur calculations tell me that if your loans are about $150,000 or less, I don't think it makes sense because the negative ramifications (filing separately, basing a large part of your financial strategy around paying the tax liability, etc.) outweigh the perceived benefit.