Hello,

I have visited your site which is a great resource for people with limited knowledge about what to do with loans. I have a particular situation which I have not been able to find in your website.

I will be graduating from the medical field with roughly 320K in federal loans with about a 7% interest rate. My decision has always been to tackle my loans with the highest interest rate and pay as much as possible with living on a fixed income. I want to pay it off in 10 or so years, but would it be best to just pay the minimum payment in IBR and wait the 20 year forgiveness? My question also is, what about the accrued interest after the 20 yrs, will that be forgiven or need to be paid back? If there would be accrued interest then I feel it would be wise to just pay it off and be done with it asap.

My other plan has been to pay if possible 70-80K a year and living off of 35K a year to pay it as quick as possible. I hate having the burden of loans over me. Would this be a wise decision?

My understanding is that whatever balance you have at the end of the repayment period (eg 25 years) is forgiven BUT the amount forgiven is considered taxable income by the IRS and so you are expected to pay income taxes on that forgiven amount in the year that it’s forgiven….which could be a very large tax burden for one year if you haven’t been saving to pay it off over the years…which begs the question, should you just pay more per month on your loans or save money along the way? Would love feedback from this from Heather or someone in a simIlar situation.

I’d rather pay tax on $320k than pay $320k.

The IRS has a insolvency form, so if you are still insolvent in 25 years, depending on your assets, you may not owe full taxes on the $320,000. Please google “IRS insolvency form”.

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