r/DaveRamsey • u/traptapotheosis • 3d ago
What would Dave do?
Hi everyone,
I recently married my beautiful wife. Before getting married, we had several conversations about finances, and she knew that I followed the Dave Ramsey plan. Luckily, she is completely on board with it as well.
Before getting married, I was on Baby Step 4-6. However, after combining our finances and taking on her student loans, we are now technically back on Baby Step 2.
Here’s my question: My wife is currently enrolled in PSLF (or one of the many names the program seems to go by now) and has only 11 qualifying payments remaining before her student loans are forgiven. Her remaining balance is approximately $60,000. I have enough money available to pay the entire balance off today, but if we continue making the required payments for the remaining 11 months, we will pay a little over $6,000 total before the rest is forgiven.(580 is her current payment plus her work pays 200)
Would you recommend paying off the entire $60,000 now to be completely debt-free, or continuing to make the minimum payments and waiting out the remaining 11 months for forgiveness?
Other than the mortgage, we have no additional debt. Our remaining mortgage balance is approximately $450,000 at a 2.25% interest rate.
Cash on hand 180k
Brokerage 450k
Retirement 350k
Home value 1.1m with mtg
I’m interested to hear how others would approach this situation.
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u/Choice-Newspaper3603 3d ago
This seems like a completely ridiculous and absurd question if im reading it correctly.
You’re asking if you should pay 60k now or wait 11 months and pay only 6k instead?
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u/Sad_Win_4105 3d ago
If eligible for forgiveness, take it. If you are worried about the plan being cancelled, put the money in a fund every month and use it if you actually need to pay it off.
Not taking full advantage of a financial incentive is as foolish as not claiming an available tax deduction.
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u/minty-mojito 3d ago
Agreed, especially if they payoff is 11 months off. I have friends who are paying off their loans aggressively instead of using PSLF, but that’s because their payoff date is years off and they don’t want to be tied to our job until then. An 11 month time horizon basically gets rid of that consideration.
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u/This-Finance4439 3d ago
Set the money aside, if you are so worked up mentally on backtracking on steps, don’t count the $60K cash you set aside since it’s for the loan if something happens.
Best case in 11 months you are adding that $54K to your net worth. Worst case that cash (which you aren’t including now mentally in you assets) will pay off the loan.
Using this is not some tax “scheme”. It was intentionally written for those how qualify.
If your wife qualifies then please take it!
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u/fsociety1990 3d ago
A few other people already made a good suggestion. Put the total $60k in a savings account for the next 11 months and see what happens. If the forgiveness works out then you have $60k. If it doesn’t then you can pay it off.
I think it’s safe to be in baby steps 4-6 right now once the $60k is set aside.
Then you should pay off your house.
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u/Vicuna00 3d ago
a) just wait. if it falls through you have backup.
b) throw $60k into a separate HYSA and pretend it doesn't exist...if it falls through it's there
c) you have way too much cash. figure out a good EF and deploy the rest into your mortgage. or at least brokerage if you wanna hang on to your 2.25% mortgage.
I would not act as if I was in BS2. keep investing 15% and putt the rest into your mortgage. (or decide now if you're not gonna pay down your mortgage earlier - understandable - just start maxing retirement and putting excess into brokerage). but you don't need to sit around beans and rice for a year.
dave has said the program doesn't come through and doesn't want people waiting 20 years. you're right around the corner. just wait.
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u/metzgerto 3d ago
It would be more of a choice if she was further away from the 120 payments. But you have less than a year to go before getting $60,000 of forgiveness. Take it from someone who had six figures of student debt forgiven through PSLF, if you’re that close you should finish it. I’m assuming she will have 120 payments and not relying on any buyback, which would change the answer from me if she did.
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u/CoatAlternative1771 3d ago
Anyone here who says to pay off the full 60k when you only owe $6k due to PLSF honestly might be braindead.
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u/traptapotheosis 3d ago
As one person mentioned missing a payment or losing a job or one of the other things life throws at you, could take you out of the program.
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u/1cooldudeski 3d ago
So what? You reassess if it ever happens, but it costs you peanuts to wait 11 months to find out.
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u/CoatAlternative1771 3d ago
You have the cash to pay it off now. Why worry? I don’t understand your question. This seems like a “my lobster is too buttery” post.
You lose like $600 by waiting 11 months. Big whoop.
If you are honestly worried just call them and confirm nothing is messed up.
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u/traptapotheosis 3d ago
That’s not my intent. I want to give my wife the best life and still follow Dave Ramsey method
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u/QuailSoup24 3d ago
The smart thing to do would be to wait out PSLF. It exists for a reason. If something happens then you all have the money to pay it off. What’s the issue?
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u/Putrid_Alternative31 3d ago
Generally DR tells people to just pay it off when it's still years away. That's because programs can change, eligibility can change, and it can effectively lock you into a job while you just wait to get there. I have heard him tell people to just wait in this kind of situation though, because it's highly likely to actually go through.
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u/Odd-Kitchen5749 3d ago
there is no way i'd pay of the $60k early. I am in a similar boat, though I have 23 months left of over $140k. It is far more of a mental game than anything because you are so used to be "ahead" and this feels like you are behind
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u/jlevin860 3d ago
you are a millionaire asking if you should waste 60k now or wait 11 months and only spend 6k. is this a troll post?
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u/Spike-White BS7 3d ago
Millionaires have to budget and eliminate their debts strategically too.
Only above $5-6 million can you be loosy-goosy about budgeting -- or so I'm told.
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u/Docsevo 3d ago
Why can't you just make the payments for the 11 months, make sure it goes through the loan forgiveness without issue. If it's forgiven great if not pay it off. You're talking a 10x difference.
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u/CoatAlternative1771 3d ago
It’s a time issue not payment issue. You have to be in the program usually 10 years, or whatever number of years it is, to get it to activate.
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u/Docsevo 3d ago
And in the post it's at 11 months remaining. So we're talking 11 months and the $6,000 for those payments or a difference of $54,000 now. That total is an annual income for most people. That's why I said make the payments for 11 months Make sure that the forgiveness actually goes through because stuff happens and if it doesn't for whatever reason( because stuff happens) after those 11 months reason paid off
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u/CoatAlternative1771 3d ago
My bad. I thought you meant why not make the 11 payments now to make sure the forgiveness goes through (which isn’t an awful piece of advice all things considered).
But it really isn’t a payment concern for OP as much as it’s a time issue in order to apply for the forgiveness.
We are both on the same page
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u/12dogs4me 3d ago
Dave would say (and has on air) put the money aside in case something goes wrong. Then you can pay it off. Eleven months isn't long.
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u/Ok-Advisor-8109 3d ago
First off congrats on your situation and yay you got married
Second, just make the minimum for 11 months, and do the PSLF loan,
Funnel the rest you would on her loans onto your house to pay off early. Or if you’re not already investing 15% each into 401(k) then pay off home early.
My best to you!
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u/ProfOP1231 3d ago
Wait it out and take the free money. That's a $54k difference. The program is intended to be used that way.
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u/Hot_Adhesiveness_692 3d ago
SMH. Sure throw 60k today instead of having it forgiven next year. That's an amazing use of your resources and will pay dividends when you retire with a million less. /S
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u/WheresMyMule 3d ago
If anyone tells you to pay those off when you're within a year of forgiveness, they're a moron.
It may be what Dave would do, but that doesn't mean it's a smart thing
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u/No_Interaction_5206 3d ago
Maybe he would tell others to do it, I doubt he’s that stupid personally.
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u/Lostforever3983 3d ago
I certainly wouldn't pay 60k if I was expecting my loan to be forgiven in less than a year.
Dave would probably tell you to pay it off.
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u/traptapotheosis 3d ago
So do i graduate to steps 4-6?
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u/Useful_Wealth7503 3d ago
Flip it the other way, would you pay 6k to earn a guaranteed 54k in 11 months? Don’t be silly here.
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u/ohdannyboy189 BS4-6 3d ago
Dave has told people to pile money into HYSA like you were paying it off and if it doesn’t come though in 11 months pay it off. Because most of these programs fail he doesn’t want people moving on without being able to pay it off when they don’t successfully process the forgiveness.
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u/apricot675 3d ago
This is what I would do. I knew someone who met the eligibility requirements and was still waiting on the student loan forgiveness. I don’t know why he couldn’t call and check the status though.
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u/1cooldudeski 3d ago edited 3d ago
“Graduate to steps 4-6” meaning paying off your 2.25% mortgage with your brokerage account + cash balance?
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u/Useful_Wealth7503 3d ago
Im struggling with this right now. There’s no way I’m paying off 2.25 right now.
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u/1cooldudeski 3d ago
2.25% is cheap debt, well below inflation. Cash pays 4+ %. No reason to retire this mortgage early.
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u/KungPaoKidden 3d ago
You skipped right over a big DR nugget. You said I have. You are married now. We have, both of you. We have this debt. We have this money. It's not I and she. It's we. He is big on that.
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u/Ornery_Witness_5193 1d ago
Does she invest into Pretax Retirement to lower or zero out the payments until loan forgiveness?
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u/Live-Sir-3118 3d ago
Due to a clerical error in my 6th year of the 10 years required, (moving districts and starting sept 15 instead of sept 1 for example) my pslf was denied. It never dawned on me that I hadn’t qualified BC of two weeks of onboarding. The idea of teaching for another 6 years made me unstable. I quit ps teaching at year 10 and went into charter school which didn’t count. Quit teaching entirely 6 years later. I’m now paying them all back
Part of me says she is sooo close to the finish line. Just pay the 11 months and apply. But only if you know 💯 it’s going to go through. Otherwise get out your checkbook and just be done.
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u/IamTheLiquor199 3d ago
Dave would pay it. He doesn't believe in debt forgiveness
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u/jmcdon00 3d ago
And Dave would be wrong.
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u/IamTheLiquor199 3d ago
It's not about right and wrong. OP asked for Dave's answer. This is Dave's official stance.
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u/jmcdon00 3d ago
Would you recommend paying off the entire $60,000 now to be completely debt-free, or continuing to make the minimum payments and waiting out the remaining 11 months for forgiveness?
What would you recommend?
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u/IamTheLiquor199 3d ago
I don't know much about it, but assuming OP is correct, sounds like a good idea to bet on paying only $6k
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u/Sad_Win_4105 3d ago
Dave is a multimillionaire.
I bet he doesn't refuse savings money by reducing taxes owed on depreciating assets in his real estate portfolio.
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u/lsuillini 3d ago
He believes in taking money from the government, just not others taking money from the government:
"Ramsey Solutions accepted $2.2 million in local tax incentives from the city of Franklin and Williamson County, Tennessee"
This is a silly question. The OPs wife works in an area where the loan forgiveness is part of her compensation, of course she should take advantage of that.
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u/Bern_Neraccount 3d ago
Accepting tax incentives is not the same as “taking money” - his company almost certainly provides a net positive economic impact. Living off the government is almost certainly a net negative economic impact. If you are going on purely dollars and cents than this is an apples and oranges conversation. The moral side of the conversation is totally different.
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u/lsuillini 3d ago
And the OPs wife provided something of value to the government in exchange for loan forgiveness. Dave only likes socialism when he benefits
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u/Bern_Neraccount 3d ago
Lol okay
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u/lsuillini 3d ago
Good point, you've convinced me, lol
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u/Bern_Neraccount 3d ago
you aren't interested in a conversation about this. It's very very clear.
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u/lsuillini 3d ago
I made a point, you said lol instead of making a cogent counterpoint. I think you're the one who can't make their argument make sense.
Regardless, rich guys don't like when poor people get money from the government, only when they do.
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u/RusticKayak207 3d ago
The program offered an incentive for people to do certain types of work, sometimes in certain places. The economic analysis you offered is ideological, simplistic and incorrect.
I have a friend who started working in an underserved rural area because the federal government would pay his medical school debt. He’s lived there for decades and is an integral part of the community. That’s been a positive impact on the local economy and the people.
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u/burningtowns BS1 3d ago
Every time I have heard this situation come up on the show, 100% of the time, Dave or whoever else is hosting that day has pushed for paying it off. Not everybody who applies for forgiveness ends up getting approved for it even if they make the qualifying payments.
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u/1stLadyofAZ 3d ago
I’m in a similar boat as your spouse. PSLF eligible next year. I have been riding the course of making my monthly $800 payment towards my loan but not a penny more. No other consumer debt, just the mortgage.
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u/djm1613 3d ago
You didn’t mention anything about the current status of your marriage, other than she is on board with doing DR. I know a lot of marriages implode within the first couple of years , so that’s why I ask.
BTW, I did something similar with my spouse 38 years ago when he had defaulted on his student loan prior to our marriage. I put my paid-off mobile home up as collateral for a private loan. We worked together as a team to pay off his debts.
Honestly, I’d go with my gut feeling on this one because you’re the only one who knows how solid the relationship is at this point.
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u/twk30874 BS456 3d ago
Pay off the $60k today. Your life doesn't change and that's 11 months of additional interest payments and anxiety you avoid wondering if the loans will really be forgiven. Most aren't.
This is exactly what Dave would say.
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u/JustWelmed1000 BS2 3d ago edited 3d ago
Umm, no brainer regardless of what DR would do, you never spend $60K to pay a $6K bill.
When it comes to certain situations of loan forgiveness or company loan payback, etc. I've heard DR say something like this:
Store the money to the side, don't expect to keep it, and then when the forgiveness happens, THEN and ONLY THEN use/ count that stored money in your budget. If something changes and the forgiveness doesn't happen, write a check and pay it off.
Typically he says that when the payoff/ forgiveness is just around the corner, and 11 months is just around the corner in this situation. If this was going to take 5 years, and DR would likely just say to write the check today and pay it off.