- No origination fee, prepayment penalty or annual fees
- Eligibility requirements: must have FR Checking account with auto-pay, working professional for at least 24 months
- Interest prepayment rebate program First Republic will rebate interest paid on the loan, up to 2% of the original balance, if the loan is paid in full within 48 months
Public Service Loan Forgiveness Maximization
Also there are several third party companies that help you sort through all the options such as LendEdu (check out their complete guide to refinancing student loans) and Credible ($1K welcome https://getbadcreditloan.com/payday-loans-tn/elizabethton/ bonus link they also have a discount with the AMA).
Keep in mind, with any refinance of federal loans into private loans, you will be giving up federal loan benefits such as Public Service Loan Forgiveness, income-driven repayment, disability discharge and forbearance options. You should fully understand exactly what you are giving up with your federal student loans before moving forward with this process. You should also consult with your tax advisor to understand the tax implications of this type of transaction.
If you are still not convinced that student loans have become extremely complicated, then this should seal the deal for you. Unfortunately, just keeping up with student loans alone isn’t enough. In order to get the best deal, you must also regularly analyze various tax scenarios and keep up with applicable income tax laws.
You might think this trouble is not worth your time but not so fast! It can easily result in thousands of dollars being saved each year. I suggest either making time to keep up with all of this yourself OR hiring an expert to help like us :-).
Tax Deductions PSLF Booster #1
Certain types of tax deductions are like boosters for maximizing PSLF. When going for PSLF, the goal is to repay the least amount possible on each of your 120 qualifying payments. Your income-driven payments are normally established based on your Adjusted Gross Income or AGI. AGI is your gross income minus above the line deductions. The more above the line deductions you have, the lower your AGI. The lower your AGI, the lower your income-driven payments (assuming you qualify to use AGI). The lower your income-driven payments, the more future forgiveness you receive. Catching my drift?
See below screenshot of the 1040 IRS form listing above the line deductions (bracketed in red lines 23 35).
You may recognize some of these deductions. Health savings account (HSA) contributions, for example, are great because contributions are pre-tax, the balance grows tax-free, and qualified withdrawals are tax free. A solid deal can turn into a home run when going for PSLF because of the reduced income-driven payments resulting from a lowered AGI. You receive the normal tax benefits AND you get the additional PSLF value resulting from your reduced AGI. Typically, each dollar of reduced AGI reduces your income-driven payments by 9-15% under PAYE and IBR.
For example, during lower income years such as those in medical residency, the Roth IRA would normally be your best bet. You would compare your current marginal tax rate to your expected future marginal tax rate to make this decision. If your tax rate is lower now that you expect it to be in retirement, the Roth IRA is the easy choice. However, if you are going for PSLF and therefore working to minimize your income-driven payments, your calculation of the Roth vs. the Traditional IRA decision must also include PSLF additional value. For some, this can totally swing the pendulum in favor of the Traditional IRA.