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I'm investigating the "best" approach towards my medical student debt. My outstanding debt is $400,000 with an interest rate of 6.8%. Presently, FAFSA is my Lender. I'm on the 10-year plan, which requires a monthly payment of $5000.

I looked at other options, namely SOFI. This company quoted me the following options:

  • 5 year term @ $8000 a month w/ interest rate of 4.75%
  • 7 year term @ $6000 a month w/ interest rate of 4.73%
  • 10 year term @ $4662 a month w/ interest rate of 4.73%
  • 15 year term @ $3500 a month w/ interest rate of 4.9%
  • 20 year term @ $2900 a month w/ interest rate of 5%

I've considered keeping my FAFSA Lender and choosing Income-Based Repayment (IBR). That would result in a monthly payment of 10-15% of my income. So, at an income of ~$11,000 a month, I'd pay $1100 a month. That's much lower and IBR will, as I understand, "forgive" the remainder of my debt after 20 years. However, the draw to that forgiveness, as I understand, is that will be treated as taxable income. So, if by the time 20 years expires, I will have had $200,000 left in debt, I'd have a tax bill of 30% * $200,000, or $60,000.

In short, choosing a private lender seems better than FAFSA, but I'm torn.

Please advise me on the pros and cons of each: FAFSA versus Private Lender. I'm definitely interested in any other suggestions too?

  • Are you sure the 5 year term is 4.75%? Seems like it should be slightly lower rather than higher. And how much can you afford per month right now? – TTT Jun 27 '18 at 14:15
  • I think you should update with actual numbers instead of rounding. (Some seem to be way off by hundreds per month.) Your current payment shouldn't be more than $4603/month. – TTT Jun 27 '18 at 16:28

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