A 40-year-old physical therapist got $222,000 in student loans forgiven through PSLF and used 2 tax strategies to pay as little as possible along the way

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Robert Metzger, Jr. and Charity Metzger posing in front of a blue background.
Robert Metzger, Jr., left, together with his spouse, Charity Metzger.

  • Robert Metzger, Jr. got $222,000 value of student loans forgiven through PSLF.
  • He got on an income-driven compensation plan as quickly as possible, even whereas he was nonetheless in grad college.
  • He paid as little as possible through the use of tax breaks on charitable donations and pre-tax paycheck deductions.

Robert Metzger, Jr., physical therapist and host of faith-based monetary literacy podcast “Family Abide,” discovered himself in six-figure student mortgage debt after ending his graduate research at Emory University in 2013.

Nearly a decade later, his loans have been forgiven thanks to the Public Service Loan Forgiveness Program, and he stored his funds down along the way.

Metzger tells Insider, “Emory is definitely the first place I discovered about the Public Service Loan Forgiveness Program,” a student-loan forgiveness program particularly for public servants who work for nonprofit, authorities, or tribal organizations. (*2*) after 120 eligible funds, roughly 10 years.

With that data, Metzger, now 40, deliberately sought out work in the nonprofit sector. In the meantime, he was decided to pay as little as possible on his loans all through these 10 years. He instantly enrolled in an income-driven compensation (IDR) plan whereas we was nonetheless in school, which made his first yr of qualifying funds $0 a month.

As he made more cash working for a nonprofit hospital, his funds elevated to $413 monthly in 2015, and $956 monthly in 2020 earlier than the pandemic cost pause. “During those 10 years, I paid $55,000 to $60,000 and none of that touched the principal balance,” he says.

His gamble paid off. According to data reviewed by Insider, Metzger received $221,804 in student-loan forgiveness through PSLF. (There is at the moment a limited-time waiver in effect to assist extra public servants attain PSLF. The waiver expires October 31. You can apply at this link.)

Here are the two tax strategies he used to pay as little as possible towards his student loans.

1. He donated $22,000 to charity in 2021

IDR plans are calculated utilizing the annual gross revenue (AGI) listed in your tax return. Metzger realized that decreasing his AGI as a lot as possible would additionally lead to decrease month-to-month student mortgage funds.

By itemizing his deductions, as an alternative of taking the commonplace deduction, he was ready to decrease his AGI by $22,015 by donating to charity.

He provides, “We pay our tithes,” 10% of gross annual revenue given instantly to one’s church, “on credit cards so that we can get the reward points. We do not go into debt for our tithes, but it’s paid every paycheck on auto-pay; 1% to 2% cash back on $30,000 adds up.”

2. Metzger used his FSA and retirement contributions to decrease his AGI much more

To decrease his AGI much more, Metzger contributed as a lot as possible to his flexible spending account (FSA). Similar to a well being financial savings account (HSA), an FSA is an account the place you’ll be able to preserve pre-tax cash out of your paycheck particularly for medical bills.

Those pre-tax contributions decrease your AGI. Accountant Akeiva Ellis says, “FSA contributions are not included in your W-2 income, which flows through your AGI. For example, if your gross salary is $50,000 and you contribute $1,000 to FSA, only $49,000 of your income will come through on your W-2.” Metzger and his spouse, Charity Metzger, contributed a complete of $7,800 to common and dependent care FSAs to decrease their AGI.

Retirement contributions work to decrease AGI in an analogous way.  The Metzgers additionally contribute a complete of $14,000 a yr to their retirement accounts to decrease their AGI, and, in flip, get decrease month-to-month student mortgage funds.

It’s value noting that decreasing your AGI in this way shouldn’t be at all times helpful. Financial planner Jay Zigmont, founding father of Childfree Wealth, says that for those who’re making use of for a mortgage or different mortgage, a decrease AGI in your tax return would possibly qualify you for a decrease mortgage quantity.

“Another downside is that you may not have enough money to pay your bills, and you will have to pay taxes at a later date on everything that you put away pre-tax,” he says.

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