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Thanks for joining us for the last installment of Heath enlightening all of us about teacher loan forgiveness options. This entire three part series started because of my blog post about my experience with loan forgiveness. Then Heath wrote Part 1 and Part 2. Make sure to check them all out to get the most information you can! (And potentially save yourself some money in the process!!)
Hello, Heath from Student Loan Insider again. So far we’ve covered both Public Service and Teacher Loan Forgiveness programs. However as it doesn’t make sense to do both, which do you choose?
Honestly, there are 3 things that will affect your decision on which to choose.
Your loan to forgiveness ratio. How much your forgiveness is for your Teacher Loan Forgiveness versus your overall loan amount can sometimes make your decision a no brainer. Here are 3 examples:
- If your account is A LOT more than your TLF forgiveness amount. If you have $60,000 in debt, it would make more sense to go for complete forgiveness after 120 payments than $5,000 after 5 years, right?
- If your loan debt is less than your TLF forgiveness amount. If you can get it taken care of in 5 years, why wait 10? If your interest and principal combined are less than your forgiveness at the end of five years, go with the Teacher Loan Forgiveness.
- Your loan can be paid off in 10 years or less. While basing your payment can save you some money and stretch it to say 11 or 12 years, it probably makes more sense to just do the five years of forgiveness and then take care of it. I mean you don’t want to keep it around like a pet if you don’t have to right?
Your marital status. This is the thing that can really make the decision hard. Because as we may recall, if you file Married Filing Jointly you must include you and your spouse’s income in determining your payment. While you can have it based on just yours if you file Married Filing Separately, there are a lot of tax benefits you miss out on while doing so and it may not make sense.
So if you enter into this then meet Mr. or Ms. Right and they make a lot of money, your payment can change by a lot. There are worse problems to have but it may make PSLF no longer make sense.
Your career aspirations. Or perhaps you will be the one bringing in the money. What if you go from a teaching job to an administrative one with a 20k pay raise. This will not only severely change your payment amount (or make you ineligible possibly) but would make you ineligible for TLF because you are no longer a classroom teacher.
However don’t let this deter you. A $20,000 raise with no change in lifestyle is better for you in one year than either forgiveness program. So go for that job and love it, just beware of the consequences.
You may also want to move closer to home. If this new job is not a Title I school, you will no longer be eligible for TLF. So this would be a case where PSLF is the way to go.
So what should you do? Well if your situation isn’t obvious, then I have a couple of suggestions for you.
First off, set up your loan like you doing Public Service Loan Forgiveness. You can still go back and apply for TLF later if it doesn’t work. So get on an income plan and act like you are going to 120 qualifying payments. If it works out great. If something changes, then you have something to fall back on.
But remember that life does change. You don’t want handcuffed to your job in either situation just because you decided you need forgiveness. So if you are able to save some money and make payments to yourself as if you are paying for your loans, I would suggest you do this. What this allows you to do is have the freedom to pursue other opportunities and still be able to pay your loans. You can earn this money through extra jobs such as tutoring. It’s a bit of a rogue way of looking at it, but it will certainly give you some freedom. Also if you do achieve forgiveness, now you have a huge funds to do whatever else you want with! While I realize this is easier to do for say $30k in debt vs $70k, it is a plan to consider if feasible.
So it appears we have reached the end of our student loan journey together. If you have any other questions, we can talk about them in the comments. I really appreciate Heather giving me a chance to give you some tips on common student loan assistance programs and hope it has been helping to you too.
Again it has been my pleasure to assist each and every one of you. I hope if you have not already, you take advantage of my free guide. If you need anything else ever you can contact me, leave a note in the comments, or let Heather know if there is another pressing issue I can be of assistance with. Have a great day and here is to student loan success!