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?