Okay, let’s talk about the huge mythical elephant in the room which is Student Loan Forgiveness. Here is something to consider: you still have to pay tax on any loan forgiven (aside frm 10 year PSLF) which is a huge financial tax burden. Let’s do an example and work out the math:

Dr. Normal has a typical student loan debt of $200,000 at an interest 6.8%. She is making a $100,000 salary and decides to do IBR (10%) with a hopeful 25-years loan forgiveness, which means her monthly payment is only $833. So, after 25 years passed, she is only paying $249,900, which is barely enough to cover the $340,000 total Interest payment that accumulated during the loan duration.

She is not even attacking the principle amount of $200,000. So, in the end, she is still left with a total student loan amount of $90,100 interest left + $200,000 original loan = $290,1000.

Assuming the same income bracket of 32% for high-earning doctors, she will get smacked with a Tax Bill of $92,832. This basically means she ends up paying $342,732 (almost 1.75x the original amount).

I know shocking right?? The math doesn’t even work out! I am all for the support of the good old U-S-A, but that is a LOT of trust to pay in our government for 25 freaking years. Also, under the fine print, not all federal loans will get approved (such as the federal family education loan). You must consider the fact that educational budgets/program and tax laws get changed all the time. Every new white house administration will run its policies differently. Who know what new orange-colored fanatic will be the next president.

 Now let imagine the WORST-CASE SCENARIO. What if somehow the program gets eliminated?

Dr. Normal is stuck with a $342,732 student loan bill with NOTHING to show for it after 25 years. Furthermore, there are just too many rigid moving gears within each program and this is the perfect storm waiting to happen.

Also, you need to make 240-300 qualifying payments. What if you miss one IBR payment due to some financial emergency? Or, if you decide 10 years down the line, you want to aggressively pay off student loans sooner due to an increase in income or trying to obtain pre-approval for a home mortgage loan (which assesses your debt to income ratio).

Even, under the 10 years Public Service Loan Forgiveness (PSLF) program, you need to be full time for a non-profit. What if you get sick or go on maternity leave, and need to be part time? Technically, then the program won’t count repayment made, each month that you are considered “part time”.

As we began to write this article in 2019, we figured that at least a few professionals who started the 10 years PSLF program back in 10/2007 should have their loan forgiven in 10/2017. We have scoured every news outlet and financial blog online; we found ONE single person who got their loan forgiven via the PSLF. We did unfortunately find multiple PSLF lawsuits made by borrowers against loan providers for misleading information of what a non-profit is defined as or delay in qualifying payments. These hard-working professionals are basically screwed and have to restart their loan payment with nothing to show for the last 5-10 years. Now fast-forward in 2022, PSLF applicants are slowly getting approved but it was due to Biden's massive overhaul of the PSLF 10 years program to fix up some the glitches. 

The takeaway is, a lot of things in life can happen in 10 to 25 years! You cannot predict the future; no matter how well prepared you thinks you are. The simple point, being in debt for 20-25 years significantly limits your wealth building.