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  1. #1

    My Spouse's Massive Student Loan Debt

    I was married last year, and unfortunately was not aware of the massive student loan debt my husband is carrying from undergrad and graduate school. His loan balance is currently $253,000 something and he is on the Income Based Repayment Plan (IBR) with a gross of around $90,000. The monthly payment is not even covering the loan interest, so the balance is just ballooning. I am debt free (besides a mortgage) and gross around $50,000. Because he is on the IBR plan, we are having to file our taxes separately, so that is where all of this came to light, and we are taking another hit in doing that. I never carried student loans in order to get my education, so am having a hard time wrapping my head around all of the options here. Hoping to find someone with some knowledge about student loan debt and how to tackle it.

    What is the best option as far as tackling these loans? The graduate loans (which make up about $111,000 of the total debt) are sitting at 8.5% while most of the others are 6.5%. The only options that make sense to me are.

    a: Pay extra on the monthly payment so that you are at least keeping up with the amount. And just save and invest any extra money until that 25 year forgiveness comes. There is a possibility of having a substantial tax bill with this option though, as any forgiven amount is taxed as income the way that it stands in congress right now.

    b. Possibly take the graduate loans and refinance them privately to get a better rate and start chipping away at those while the rest sit in the IBR plan.

    Any other suggestions would be greatly appreciated as well. I am just feeling so hopeless with this situation.

  2. #2
    Welcome to the site.

    What field is your husband in? With that much debt, I'm hoping he is a physician or other professional. How are his prospects for getting that income up over the next couple of years? Is there anything he can do now to boost income - work extra shifts or take on a side job? Assuming he is in good health, there's probably no reason why he can't be doing 60+ hours/week. $90,000 is a decent income but not with a graduate degree and more than a quarter million dollars in student loans.

    You guys should be living super frugally and attacking the debt aggressively. Forget that you're grossing 140K and live like you are still just out of college. If you can put 20% toward the loans, you'd have them paid off in 9 years or so.

  3. #3
    Thank you for your quick reply! He is a Physical Therapist, and unfortunately, the salary in Nebraska doesn't match the cost of schooling at all. The main physical therapy job (as a director for 2 outpatient clinics) nets only about $73,000. He has picked up a PRN job on the side as a home health PT which is adding the rest of the income, so he is working probably 60-70 hours a week already. No, the degree was not worth it at all!!! But that's what he choose to do, so that is the predicament we are in.

  4. #4
    If you intend to repay the loan principal no matter what, you may as well go ahead and file jointly, so long as you can swing the higher minimum payments on the loans. You'll pay less income taxes. The higher payments will just mean more going towards the debt.

    I feel for you. I once married a dude without thoroughly looking into his finances. It was a rude awakening.

  5. #5
    If you are thinking "Well, I'd like to have it forgiven, but what if it doesn't work out and my balance has ballooned?" I suggest you take a hybrid approach. Make the required payments only and funnel extra money into Roth IRAs and taxable investing accounts. When the time comes for forgiveness, if the balance is not forgiven, you will have some assets you can use to pay towards the debt. If it is forgiven, you will have some assets you can use to pay the taxes. (Your tax rate is less than 100%, so paying taxes on the forgiven debt is less expensive than paying the debt itself).

  6. #6
    I'm not sure if it makes sense to pay the principal with a loan that has ballooned this large. Or just sit back and wait for the forgiveness and pay taxes on that income. The other tricky part is that all of the rules with the IBR plan can change along with presidencies. The initial thought about Trump is that he will change to 12.5% income payments (right now my husband is paying 15%), and decrease the forgiveness to 15 years (rather than 25). My husband is 6 years into the IBR payment plan already, so it would possibly be forgiven in 9 years.

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