Heather,

I’m getting married soon, and as my fiance and I have started talking about finances a lot more, I’m learning that we have some big decisions to make. Here’s the deal:

- My fiancé is about to start her third year of medical residency. She has $360k in student loan debt at 7% interest, and is on the PSLF program. It allows her to have minimum payments until she completes residency, and then she’d be paying 10% of her income toward the loans for 10 years. If there is any unpaid balance after 10 years, and she’s been working for a non-profit the entire 10 years (her residency is at a nonprofit hospital now), the entire balance will be forgiven.
- The reason she took out a PSLF loan in the first place (recommended by a student-loan advising company that went bankrupt after fraud cases…) is that she thought that working at a non-profit hospital would qualify her for the 10-year debt foregiveness. Problem is, she’s learned that’s not exactly easy. Turns out that even if you work at a non-profit hospital, typically the physicians group is for-profit, which would disqualify her from the debt foregiveness.
- I have a good income and make a bit less than $200k/yr. Normally a great income, but we live in the Bay Area with very high housing expenses, and her current salary is around $50k/yr. I currently have a large mortgage on an investment property, and I don’t have enough equity built to add more to this loan.
- Her parents are willing to refinance their home mortgage to take cash out, pay off the loan, and then have us pay for the mortgage. So if we converted her debt to a mortgage on their place, we’d have payments down to like $1600/mo on a 30-yr loan. There’s a risk they’d want to sell their place in 5 years, or something like that, but I’m confident we’d have enough savings/income by then to figure out a new solution. Doing this, however, would mean that we’d need to start making payments on the debt right away, rather than another 2 years of minimum payments.
- I do have a good savings I’ve built up (low 6 figures). She has essentially $0. So we do have the good fortune to be able to pay down a good chunk of the debt right now, if that’s what we want to do. But being at the very beginning of our marriage, I’m certainly a little leery of doing that.

I’ve read your posts about the future political uncertainty around PSLF, and I’m very wary of whether her debt could really be foregiven. And if we hold out those 6 years trying to do it, accumulating 7% interest every year, it’s a very expensive gamble if it fails and she can’t find non-profit work, or they change the rules and start counting my income (or limiting foregiveness to $57.5k). With interest rates at near-record lows, I’m wondering if we should just throw in the towel on PSLF and refinance to a mortgage, even if it means that we start paying $1,600/mo now, rather than another 2 years of minimum payments.

I know it’s a complicated and personal situation. But I think we need to make a decision one way or another. I’d be happy to pay you for some student loan advising for this situation (as I really can’t seem to find many other experts on the topic out there that don’t seem shady), but if you’re up for replying, that would be wonderful too.

Hey Heather, any thoughts on this?

I haven’t seen Heather posting much on these forums lately…

But if I were you I’d wait until 2017 to make a decision. It is the first year that people can apply for forgiveness (not sure of the exact month, maybe summer?) so we can see if it goes through. Plus, it is an election year, so who knows what will happen. In the meantime, if your fiancé is working at an eligible place, make sure she sends in her employment certification forms annually to make sure they are counting her payments as qualifying. You do not want to end up in a situation where you wait until the last minute to find out the payments have been not counting all along…but keep in mind her loans will transfer to Fedloan servicing, which is most likely going to give you more trouble than your current loan servicing company. (they are incompetent) So maybe, on second thought, wait until 2017 to send in that form if you haven’t done it already.,

My take is that the program will stand. There have been other forgiveness programs that have occurred without fail, and when they phase these programs out, they are only phased out for new borrowers. I don’t think PSLF will be any different.

I’m holding out for PSLF, but I have my loans only partially consolidated to help target payments towards the high interest loans first if I do end up having to pay them back in the end. So, I’m prepping for a worst case scenario.

Thanks Hart, this is super helpful. I didn’t realize Heather doesn’t really post here anymore—that’s a bummer. But at least it’s good to hear advice from someone else in a similar spot.

And I think you’re right, waiting one year to see what happens when forgiveness starts getting requested is probably the best way to go. At 7% interest, waiting 6 months will add another $15k to our outstanding debt, but that pales in comparison to the value of the money we hope to get forgiven. We’ll hold out at least until next year, and see what happens then. I just hope interest rates won’t have risen too much between now and then, if we end up going the refi route.