PSLF? … nyet
This happened yesterday. I had just finished the Anki deck. Getting ready to GTFO library.
...end up running into a frantic huddle of five MS2s. I'm just trying to skedaddle past them but couldn't help overhear the stressful(?) conversations and exchanges about student debt. Financial anxiety vortex that it was, I slowed a bit and got caught (fml). "Yo, what do you think about PSLF". Was it my devilish good looks? (one of the five was an attractive girl, don't hate), nah must be my unbeatable aura (leave me and my anki deck alone guys). What followed was a good 30-minute waste of my time (or not). 1/2 the people have thought seriously about this, while the other 1/2 is just floating away in ignorance/bliss, etc. I gained some clarity, so I wanted to share.
Pay gap matters: It's the difference between the salary you'd earn in a cozy, PSLF-eligible academic job and the small fortune you could rake in by going private practice. Why? Because it isn't just how much debt you can get forgiven, it's the opportunity cost of letting go of a high salary. It has to be compared. Add your private loan cost, subtract PSLF cost: Net benefit of PSLF. However, you'd have to compare the PP income gap then. If you run the numbers, you'll quickly see the significant impact this has. Private wins out quite often.
Starting Debt: Waving goodbye to that number on the yearly debt statement that resembles the GDP of a small country after ten years of service? Yes, please. A very high loan balance ($300k+) makes the PSLF benefit large enough that it can overcome even a significant Opportunity cost. A low loan balance (<$150k) often makes the benefit too small to justify taking a lower salary. Play around with this concept.
Time to forgiveness: Third most importatn factor I think. Self-explanatory: if you are doing a neurosurgery residency for a bazillion years, make small PSLF-qualified payments and get to Valhalla.
PSLF route not as beneficial as going private loan refi and taking the higher level of pay.
Inputs used: $ 250,000 debt with a 6% APR, a family of one, a $ 60,000 resident salary for 3 years, then attending, with a take-home after-tax PSLF of $ 160,000, and a private loan of $ 210,000 (yes, that's a lot) against a private loan at 5%, with a 10-year term.
Here are some examples:
Interest of 8.94%, 300K debt, 3 year training still (assuming youre making qualifying payment through residency) yields 261,559K PSLF net benefit
At 400K debt things are interesting (3 yr training still), you get 394K(!) PSLF benefit and it beats private refi.
at 300K debt but 5 years of training (say surgery), 293K PSLF net benefit but due to time to forgiveness shortening, it beats out private refi (200K opportunity cost).
Ok back to life of sucktitude and Anki. You can try calculator here
