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I recently signed both my wife and I up for the new SAVE IDR plan for our student loans. This put our total monthly payment from $350 to $0... I am eligible for PSLF so my loans (about $24k) will be forgiven around 2029. My wife's loans (about $4k) will be forgiven about 2042. I realize that as our household income increases that could also increase our monthly payments. But, the balances won't increase since the government pays any interest while on the SAVE plan.

Are there any pitfalls with us "paying" this insane minimum and then letting the balance get forgiven? It feels weird paying nothing on almost $30k and then its just "gone" after a certain date. My spidey sense says this is a "too good to be true" type of situation.

EDIT: MOHELA confirmed that the monthly payment for my loans will be $0. I may still make payments on my wife's loans since the balance is relatively small and forgiveness will take much longer than mine. I am very happy with my government job so I will definitely be working here at least until 2030 when my loans are forgiven.

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If you want to work in the public sector (where I presume you're making less than you would in the private sector) then your plan is feasible, but there are downsides and risks:

  • You might find that you hate working in the public sector
  • Upside potential is often more limited than private sector jobs
  • The PSLF program could be terminated (although this would be political suicide in all but the most dire of economic situations)

So the main cost is an opportunity cost by foregoing higher salaries in non-public work. It may not seem like a lot now, but private sector salaries tend to grow faster than public sector, so over time the different may be more noticeable.

If for some reason you decide to abandon the PSLF jobs, the main cost to your student loans will be much more accrued interest. For your loans it's only 6 years, but with only $4k hanging around for 20 years, your wife might find it more comforting just to pay it off when you can and not risk feeling "stuck" in that job.

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  • "PSLF program...terminated...political suicide" - Indeed. I would expect what I'll call a bamboozle-termination: Instead of being officially canceled, the program is still running...but with a series of new "administrative rules" that make it effectively impossible for anyone to qualify. Maybe couched in terms of "fraud prevention". Then the people effectively-canceling the program could protest "No, we're not canceling the program, it's still there, it's the kids who are wrong for not applying on time..."
    – Brian
    Nov 9, 2023 at 22:31
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    With the new SAVE repayment plan, the government covers the accrued interest every month, so there is no accrued interest. If the OP decides to leave his public service job, it will mean a much longer time until loan forgiveness, but his balance is not growing in the mean time (unlike with other Income-Based Repayment plans). I completely agree with your point about potentially keeping a lower-paying job to continue the PSLF instead of taking a higher-paying job elsewhere.
    – Ben Miller
    Nov 10, 2023 at 1:59
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    I realize the whole argument for/against public sector work. I was more asking about potential downsides to essentially paying $0 and counting on forgiveness. Ben Miller is correct, no interest is capitalized even though we aren't really paying towards the loans.
    – Nosjack
    Nov 10, 2023 at 19:06
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    I read the question as saying "Given that I am eligible for this program, are there pitfalls on taking advantage of it?" not "Are there pitfalls of taking steps to make myself eligible for it?" Nov 11, 2023 at 1:35
  • @Brian: From reading the news I believe that bamboozle has already been in place for most loan forgiveness, including PSLF, and that things actually got somewhat better recently (in terms of processing forgiveness for those who meet the spirit of the law). But that just shows how easily it could go back to problematic. And I have no direct knowledge, only news articles.
    – Ben Voigt
    Dec 14, 2023 at 16:46
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After extensive "research" (read: using Google), I can not find a real reason to not utilize the SAVE plan and pursue PSLF. I have already verified with MOHELA that my employer and payments qualify towards PSLF, and I am perfectly happy continuing in this job for 5 more years.

Usually, not paying on a loan is a bad idea because interest accrues. This is not the case with the SAVE plan since the government covers any interest if my payment is $0. Therefore my loan balances will never grow in the absence of payments.

There are of course the caveats that @D Stanley mentioned, which anyone considering this route should think about.

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