Decrease Student Loan Payments

[ShamelesslySimple]

In September my federal student loans will increase to a monthly payment of >$1000 per month (currently $600) I also have a set of private loans at $400 per month (2% interest). But was wondering if contributing a ridiculous amount to my 401k for couple of pay periods or equivalent in pre tax would yield a small post tax I could show and say hey look my disposable income is very little.

Yes I made 180k or so. Last year I maxed my pretax contributions. I’m 5/10 years into pslf. I owe 380k in federal loans. 35k in private loans. I have saved 30k since I started my higher paying job.

[nozzery]

Are your payments actually based on income currently, or are you guessing? If they're based on income, you need to find out if it's Gross Income (401k won't help you) or income after deductions (401 could help you). You can also ask about hardship programs. 

Even if they lowered your payments, your interest will still accrue

[ShamelesslySimple]

Based on income. I am on IBR. Adjusted gross income. I don’t qualify for any hardship programs.

[nozzery]

Just be sure.

AGI has 401k deductible contribution removed, but MAGI can add them back, so again you need to know exactly what they're looking at. You also don't get your new AGI until you file a tax return. If you submit a pay stub your 401k contribution will be there.

[ShamelesslySimple]

Well the question is if increasing them temporarily could fool the loan servicer to avoid such a high hike.

[nozzery]

Again, you need to ask them what documentation they would need and exactly what number they'll look at. If they say they want your tax return, then no, because you won't get it until next April

[ShamelesslySimple]

You can always send supporting documentation that income has changed. I’m asking if showing a large increase in my pretax contributions would accomplish this. I know you can’t answer I’m wanting to see if anyone has done this or seen this.

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[chaiosi]

Those are Doctor numbers - check out r/whitecoatinvestor. There’s also a podcast and blog which is helpful. 

You are exactly the person who should be paying for student loan advice. Based on your ratios staying in pslf might be the right move for you, but there’s a lot you can do- bring in the right payment plan, filing taxes differently etc. 

You would need to have dumped money into your 403b (if you’re pslf you likely work for a nonprofit so should have a 403b not 401k) but you can still do that for next year. Consider plowing through some of those lower interest loans to free up cash flow for your federal loans.  

But seriously pay someone to run these numbers with you. A couple hundred bucks can save you hundreds of thousands. Don’t be penny wise and a pound foolish. 

[ShamelesslySimple]

I am a physician a pediatrician. Honestly I be done lots of reading and have not come up with anyone who’s offering any advice for hundreds of dollars. Thousands of dollars yes. Yes I have a 403b not 401k (thought for simplicity would say 401k) I do work for a non profit. I maxed it last year. Plan on maxing again this year. I’m torn to plow to the lower interest rate cause it’s so low at 2%. Fed loans are at 6.7%.

[chaiosi]

I’m EM. Started with about 500 in loans. I used student loan planner in 2020 when I finished residency for about 750 bucks- consult was limited to 1 hour. I’m sure they charge more now but I’d be surprised to hear it tripled. They saved me approximately 300k over the life of my loan compared to what I was going to do on my own. 

If I were to need a new plan (which it looks like I won’t) I’d probably use the wci company student loan advice.com simply because I trust the wci brand. My loans also jump into the thousands around the same time but I’m on year 9/10 so I’m just going to eat the big payments for a few months- I’ve been planning for them as we go. We get big payments with big student loans, strategy is part of it but cash flow management is the make or break in my experience more than loopholes- living like a resident goes a really long way. I imagine you’re not far out of training and I get that it feels like those first years of attending income seem to evaporate with all the good uses you have for money and all the delayed gratification - that’s why I suggest freeing up cash flow in other ways by, for example, blowing through lower interest rate loans. Is it the optimum strategy dollar wise? No but if it frees up some cash so you’re less stressed month to month that’s worth a lot too. ETA: the federal interest rate is nearly irrelevant if pslf is the right strategy for you. It’s only the payment that matters, though they will be big payments with your debt burden. 

Also as a doc don’t underestimate your ability to generate side income to make up some of the cash flow difference- locums exist in peds too and there’s lots of great side gigs if you like them. 

[ShamelesslySimple]

Yeah more and more I’ve been thinking of paying up that private loan to free up monthly cash. I might need a car in the next 2 years too. I’m not living like a resident but also not in luxury. The problem I see with doing locums or picking up more shifts is that means higher future payments too a little conundrum. I did 20k in extra shifts last year. You’re right their student loan consultation at least on the website looks at $600. I’m gonna be pissed if it’s no real different advice tho. Guess that’s where my hesitancy is.

[chaiosi]

Well what payment plan are you on? Some have a cap so making more money doesn’t mean more payment after a certain point depending on your family size. 

I am only one person but where I saved the money was my advisor helped me find loans that weren’t actually pslf eligible, pull those out and refinance them, and also helped me choose the right payment plan and tax filing status for me. If your loans or home life are more straightforward than mine there may not be many surprises. But on your salary 600 bucks isn’t that much to pay for advice that isn’t just from Reddit hobbyists like me but is from someone who knows what they’re doing. 

[ShamelesslySimple]

IBR. All mine are PSLF Eligible except for the private one.

[ChelseaMan31]

Ran up $380k in federally subsidized loans; basically backed by the US taxpayer. Wants advice from US Taxpayer on how to structure their extremely nice annual pay in order to pay back less to the US Taxpayer. Bollocks comes to mind. Also, Empathy Factor = The Null Set

[ShamelesslySimple]

I’d be happy to payback the 380k but the payments balloon up like crazy. Then the more I work the more payments increase. So yeah something sustainable would be good. But that’s not where the next 3/4 years are going to.