Should I pay my loans off sooner?

[Anonymous]

Have over 55K in student loans.  Really want to purchase a home in a few years and my student loans are my largest debt and seems to be affecting my score since i've always been in forbearance or deferment status.  

I enter repayment soon.   I've consolidated my loans and was told about the Public Loan Forgiveness, IBR and ICR program, which will allow any remaining debt after 120 payments to be forgiven. 

I'm signing up but was thinking if my finances continue the way they've been going lately i'd actually be able to pay my loan balance of 55K within seven years.  Would it be wise to pay it off early considering the balance will be forgiven after 10 years?  Or should i take any extra earnings i have per month and add it to my savings towards a down payment on a house?    Any feedback is appreciated.

[IOBA]

That is a tough choice.

if it were me, I would build up an emergency account.   Then plop everything extra on the student loans to get them paid off faster.   There's no guarantee that you will still be eligible for the program in 120 pymts.   Things like lay offs, injuries, etc play into effect to your work history.   

Some one else has posted that their student loan debt was way too high to qualify for a mortgage.   So something about.

[mazinaige]

I agree that is a tough choice. With a debt load of 55K do you even qualify for IBR? My understanding is that as long as your debt load is more than your annual salary you should be able to qualify for IBR. If you are not sure visit IBRinfo.com.  

Regarding the PSLF program, are you working in the public service and do you plan to continue to work in public service for the next ten years?

Lastly, I wouldn't worry too much about the debt to income ratio anymore. Over the last year banks have begun to recognize the IBR and PSLF programs and consider what your monthly repayment is rather than looking at your total debt to income ratio. Many people who are enrolled in the IBR and PSLF programs have reported being able to secure mortgages this year. This wasn't the case last year. You can read about it on the Facebook group: The Project on Student Debt. 

[Anonymous]

Thx for the feedback. 

[Anonymous]

Thank you both for the feedback.

Mazinaige, Yes I do qualify for either of those programs.  My salary is below 55K.

Also, yes, i hope to remain in a public service field.

I'm really not worried that i won't qualify for the IBR program.  Even if i go ICR i'd be fine because i was intending to pay more than the standard payment, and way more than what they'd probably quote me anyways.  

Thx for sharing that tid bit about the debt-to-income ratio....that really is my big concern and whether that would really affect me. 

Based on the feedback from you guys, still signing up for IBR or CR and PSLF, but think i'm going to aggressively attack my student loans so that i knock down some of the interest and in hopes this will also improve my credit and chances of qualifying for loans.   I'm nearly free of credit card debt and I do have an emergency fund which frees me to focus more attention on my student loans.    But I agree, the future is truly uncertain.  I have every intention on continuing my aggressive saving plan  

[Jazzzy]

I talked with Direct Loans about applying for IBR. I qualified at the time because I had just graduated and I was not working full time. My income has gone up significantly now, and I now work full time.

At the time, Direct Loans told me to "be careful" about applying for IBR due to the fact that once you are on IBR it is difficult to get off. They said you can't just be on it when your income is low and then decide you want off when your income goes up. In other words, your payment can go up higher than it would be on standard repayment.

I decided to pass, even though I work for a nonprofit and would qualify for the loan forgiveness. I could see my payment going through the roof.

[Anonymous]

That's interesting.  I spoke with them too and several reps told me that at anytime i could switch back to a standard repayment plan without any problem.  However once you leave either the IBR or CR plan you'd lose the months paid towards that 120 payment requirement.   No one told me switching would alter your standard payments - although i could understand why because if for years your paying less than you would on the standard plan, then all of a sudden switch plans you'd probably be behind in the total amount you would've paid. 

Also I was told in order to be in the PSLF program you HAVE to be in either of those programs to qualify, and must let them know you wish to enter the program BEFORE you even make your first payment under the IBR or CR plan.  There is no paperwork to fill out for the PSLF and basically they just put a notation on the account (at least this is what i've been told)

Definitely going to call and clarify.

Thx for sharing.