What to do with a loan that will be forgiven in about 10 years?

Hi! I have a special type of loan. There's a minimum payment each month (but for me at the moment it's zero because of my lower income). All that's not paid off after 10 years (it used to be more, but 10 are left) will be forgiven. 
Should I just wait it out? Or try and pay it off anyway? That would feel like throwing money away. Then again it sits in the way of us getting a proper mortgage.

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  • Why does it stand in the way of you getting a mortgage?  Generally having active/current loans looks beneficial in the eyes of lenders, as it shows you are able to handle credit (as long as the payments are being made on time, etc!).

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  • It's just how it works in our country. The banks use a factor of almost 2 of the original debt to lower the amount you can get for a mortgage. This is because the monthly payments lower your monthly available budget. So, even if you're almost done paying it off, they still use the original debt since that informs your monthly payments. 

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    • Winterlover Wow, fascinating! That's so frustrating, huh. Definitely an interesting question you've posed, then!

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    • T Kelly
    • Social Worker by day, Volunteer First Responder by Night
    • helping_hand
    • 4 yrs ago
    • Reported - view

    Hey Winterlover,

     

    I have a similar situation that I debate as well. I have student loans ($53,000) that can be forgiven after 10 years of working at a non-profit agency when I make an income based minimum payment. Truthfully I'm going to pay ahead when I can, in the hopes of ridding myself of that weight sooner and start working towards my other life goals (owning a house, saving for retirement, etc.). But should I feel that I can't or life throws a wrench in, it simply pushes back my minimum payment when I pay ahead, rather than having to make the monthly payment next month. I'm not sure how you're payments are structured, but that's how I look at my situation.

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      • Mayfly
      • Forest_Green_Crab_27286
      • 4 yrs ago
      • 2
      • Reported - view

      T Kelly   Be careful with this.  Public Service Loan Forgiveness (if that's what you're referring to) requires 120 monthly payments, and only payments made while on certain payment plans count.  If you're paying more one month and not making a payment the next month, that means that you're only getting credit for one payment.  The month that you don't make a payment will not count toward your 120 required monthly payments, and that will ultimately mean that you will have more than 10 years before your loans are forgiven.

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      • T Kelly
      • Social Worker by day, Volunteer First Responder by Night
      • helping_hand
      • 4 yrs ago
      • 2
      • Reported - view

      Mayfly Thank you so much! That would be the forgiveness program. I'm still in school and haven't looked at (or considered) the details of the loan and forgiveness just yet, but I will certainly look more closely now!

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    • eloquentz
    • Numbers Wizard (Accountant), Acoustic Artist (Musician) and Jill of all Trades (Wife & Mother)
    • eloquentz
    • 4 yrs ago
    • Reported - view

    In the grand scheme of things, SOMEONE pays for that loan if it is forgiven.  If you are able, I would make as much payments as possible.

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