Budgeting Early Retirement Journey

Why Yes, This Is My $300,000 Student Loan Repayment Plan: REPAYE 2018

So the other day, I got an email from my student loan servicer. That’s better than a wedding invitation, said no one ever.

What the heck is REPAYE? (source StudentLoanhero.com)

With the REPAYE program, payments are capped at 10 percent of your discretionary income. Your discretionary income is calculated using your adjusted gross income minus 150 percent of the state poverty guideline for your family size.

Balances for undergraduate degree loans are forgiven after you make 20 years of eligible payments. Balances for graduate and professional degrees, or a combination of graduate and undergraduate degrees, are forgiven after 25 years of eligible payments.

The IRS says forgiven student loans are taxable income, though. So if you qualify for student loan forgiveness under REPAYE, plan ahead and prepare for the potential tax bill you will end up with.


The government also covers 50 percent of accrued interest charges on unsubsidized loans throughout the REPAYE repayment period.

What does that mean for me:

The difference (Standard Repayment vs REPAYE):
Using standard repayment as the original: $3642
Using REPAYE amount as the new: $566
The percent difference is (3642- 566)/ 3642 * 100 = 84.5% decrease in monthly payment

Because I chose to contribute to a traditional 401k vs Roth 401k, I decrease my adjusted gross income and this helps keep my payments low. This year (2018) will be the first year I attempt to contribute the maximum. Although I can calculate how this will affect my monthly payment the next time I re-certify, I’d rather just wait and see the impact My Early Retirement Journey had on this facet of my life!

I know debt is sacrilege in the FIRE blogosphere, but each person’s journey is different. It makes more sense to me from a financial standpoint to carry this debt and apply for loan forgiveness after 25 years.  I hope and pray it pays off!  The most salient ramification is that if I were to take on a mortgage, my debt-to-income ratio would be quite high. Psychologically, carrying a mortgage and this loan is burdensome which plays a role in why I have gotten out of the housing market.

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  1. Ye gods! That loan figure is higher than any mortgage I've ever had! Did you go to Yale for a doctorate or something?!!! I know degrees in America cost so much more than here in the UK but have seen other loan balances and none that high. Maybe I shouldn't worry about DD2's projected £50k student loan.

    I can see why you wouldn't want to try and pay it off aggressively, it would take all your spare cash for many years.

  2. Funny… I actually never thought about it like that. Somehow student loans seemed more a fact of life (for me) than a mortgage. I don't have a Yale degree but one of my (three) degrees is from a fancy expensive school. The 3rd degree was just expensive. Ha, I'll trade with DD2!

    For some reason, I guess financial freedom was just not even on my radar. Student loans were just a fact of life. I used to scoff at people who would bargain shop for education, you go where you get in, I thought. Ha, who's laughing now!

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