My husband purchased his house a year ago. We are looking into making it an investment property. We want to fix it up and pay off a reasonable chunk of the mortgage to hopefully have a good return when we choose to sell. I came into the relationship with $53,000 in student loans and since we just got married I have filled single, leaving my payments at $18.00 a month as long as I continue to fill single. There is a forgiveness on student loans after 20 years. I assume my Income will go up but at $18.00 a month I am unsure whether or not I want to give it a good go and strap my family by paying off my student loans and keep puching towards paying down our mortgage. Or if I should ride out the IBR repayment program and just pay what I am asked and wait for it to be forgiven. Because I work for the state there is something called them public service loan forgiveness program that would also pay off my loan after 10 years as long as I have been working in the same place as well. What should I do?
2 Answers
You can't file single. The other choice (aside from married) is "Married Filing Separately". This may impact the loan situation. This is not splitting hairs, you are married and single is not a legal filing status for you.
If the rules of the student loan require that you actually be single to maintain that $18 deal, you are not able to keep it.
What is the interest rate on the SL if it went to a standard payoff schedule? And what's the rate on the mortgage?
Regarding the accelerated payoff on the mortgage - this is a separate issue from the return on the property. Whether you sell for a 1% gain or 100% gain, the rate you earn on the mortgage prepayment is the rate of the mortgage. If that rate looks good to you, that's fine, but be sure you don't have to start paying that student loan back now that you are not single.
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1Indeed, to be filing single you have to have been single on the last day of the tax year.– jlduggerNov 1, 2011 at 20:19
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I should have explained that differently. I do understand the Married Filing Separately choice. I just need to really way out the best scenario for me and my family. I just keep thinking that if I can get a job in public service loan forgiveness program, my loan could be forgiven after 10 yrs. Then I wouldn't necessarily have to worry about only paying a certain dollar amount and never catching up on the student loans. I was just concerned if I continue to pay the set dollar amount I will not make a dent in that debt. What if I wanted a new house? I would never qualify with that on my credit.– mnicklosNov 1, 2011 at 22:50
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I am not clear on what your current choices are. Under what circumstanses do you maintain the $18? Nov 1, 2011 at 23:00
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I believe that because my AGI hasn't changed much and because I will continue to fill seperatly I will be able to maintain that dollar amount. Or close to it.– mnicklosNov 1, 2011 at 23:15
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I wouldn't pay a dime more on the student loan. $18/mo is $216/yr, less than 1/2%. Let inflation eat away at it for you, and as time passes your rise in income along with inflation will make the payment seem less, if you ever go into a regular payment schedule. Nov 1, 2011 at 23:50
Before you consider either paying down the mortgage or your student loans, put any extra money you have into a good, old fashioned savings account. Ideally you want at least six month's worth of cash tucked away.
The student loan repayments are based on your income, not the amount owed. Because if this, you might bed tempted to pay down the mortgage instead. However, assuming you plan on paying the entire debt, which one you pay down depends on the interest rates. I believe most federally guaranteed student loans are between six and seven percent, but the mortgage could very well be under five. In that case, paying the student loans well save you more in interest than the mortgage will.
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"The student loan repayments are based on your income, not the amount owed." While true, it also sets the upper bound. Under some circumstances IBR could show you paying faster than the standard 10 year.– jlduggerNov 1, 2011 at 20:24
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The savings account is something we are working on and is such a great idea. The way the economy is and how fast things are changing makes me nervous about how to ensure my future as a retiree will be sound. If I can get my student loans forgiven and make extra payments to my house that is what I would rather do. Lets say I wanted to purchase a new home and I was still making may payments to SL @18.00 a month. They would see a large debt. I'm worried that in the long run it will hurt my chances to future credit.– mnicklosNov 1, 2011 at 23:13