Even my financial planner, who first looked at our finances in September, said that it can’t be done according to our current financial situation. Good information indeed. I think I read that it is unlikely in todays REPAYE that it would exceed 10 year standard – is that your experience also? Loan forgiveness. Under PAYE and IBR, you could file separately and each stand on your own. Public Service Loan Forgiveness - REPAYE is an eligible repayment plan for PSLF, so use REPAYE features to make the payments towards your loan forgiveness with PSLF. Then we moved to IBR coupled with Public Service Loan Forgiveness (PSLF) for borrowers who took out loans between 2007 and 2011 and work at a 501(c)(3). IBR vs REPAYE. REPAYE closed the married filing separately loophole. Let’s talk about it. A recent reader email points out that while the creation of REPAYE is a good thing, the transition from IBR to REPAYE does create a few questions, especially for those seeking Public Service Loan Forgiveness. We were the only two students in the classroom during these meetings. @Big Law Investor I’d love to see someone who started off on REPAYE and switched to IBR too, but I’ve yet to meet one. Your article seems to argue otherwise — please let me know if I’m interpreting it wrong. I love this advice and I feel like every college student should hear this. I’d be living like a student for the next 20 years in standard repayment. Send me an email). The IBR monthly payment cap is extremely relevant in situations where you have a high-earning spouse. The numbers ended up showing that it would be better to pay taxes on a slightly larger number, than it is to pay twice as much every month without ever even touching principle. I remember coming home to late night discussions about our “game plan”. There’s even an emerging industry of consultants that can work with you to make sure you’re making the right decision (or double-check your math), including one who is a sponsor of this site. Thank you so much for this article — I’ve been under IBR for the last 3 years (am a resident physician) and have been doing the “married filing separately” tax thing due to prior advice (from Dept of Education, the now-defunct GL Advisors (shady AF), and my current loan servicer Nelnet): I was told that even if my spouse doesn’t make more money than I do now, it’s best to always file separately if there’s a chance said spouse will be making significantly more within this 10-year window. I would have a folder on your computer (backed up of course) that has every single payment you’ve made, has every piece of information you’ve submitted to Navient, etc. I never spoke to him, not once. The MFJ vs MFS decision always need to involve a calculator to figure out what’s right for you. I had to search for this in my archive of notes (glad I found it) but either search for “community property state” in this PDF or go to page 66112 and read “Treatment of Married Borrowers”. The IBR plan requires you to pay 15%. I knew I had to get out. When someone looks at the big picture on how student loan debt affect people in the long run as far as being able to afford a mortgage loan, a car and life in general, there’s so much to be said. However, we chose IBR over REPAYE because of the married borrowers section of the chart. @Drew – No, as far as I can tell you can’t get kicked out of IBR. I completely agree, I wish financial advice (of this kind) would be more widely acccepted and/or taught in schools! I have put money towards investments to prepare for the ominous “taxable event” that will come after my 300th payment and my balance is “forgiven.” I guess my question is… do I need to be concerned when it comes to my loan forgiveness that the IRS will look back and see that my annual income was far higher than what Navient used to determine my monthly repayment amount? And the ICR plan demands 20%. It was the YOLOs of all YOLOs. Discretionary income is adjusted gross income minus 150% of state poverty level for the borrower’s family size. All subscribers will receive weekly frugal challenges for the first month, to kick-start your way towards financial freedom! Both PAYE and REPAYE are qualifying repayment plans if you’re pursuing Public Service Loan Forgiveness or if … I have talked to numerous professionals, and there has been many instances where they asked a question regarding a fundamental aspect of their loan program because they just didn’t have the answer. My monthly payment towards loans are insanely low relative to my loan amount because Navient only considers my very low guaranteed daily rate when determining my monthly payment each year since my bonuses can fluctuate based on production. Depending on my risk tolerance I could alternatively use index funds or some mixture of index funds and deposits. 4. At that time, I thought that I was the only one who did not understand this stuff. Issue 3: REPAYE was created by executive order. I’m hesitant, however, first because you and many others recommend refinancing. There was only one other classmate, a boy, who was taking notes with me. However, if you choose to do the loan forgiveness program, it will actually benefit you most if you pay the least amount possible. Under REPAYE, you pay 10% of your discretionary income, no matter what. Therefore, if your husband has any income, it’s beneficial from a monthly student loan payment perspective to file separately. You can only do this while you still qualify for IBR (i.e. The percentage is 10% for borrowers who are new borrowers as of July 1, 2014, and 15% otherwise. Please understand that our decision tree does not necessarily predict your own decision tree. Unfortunately, we immediately had to eliminate PAYE because I had student loans that were disbursed before October of 2011, which were my undergraduate loans. So married filing separately is a bad deal too and if you have a high income earning spouse, you might be trading a much higher tax bill for the benefits that come from calculating your loan payments based on your separate income. The take away message here is that, maybe no one actually knew what they were doing as the graduating days neared us. – Both spouses’ income and federal student loan debt, if applicable, is considered regardless of filing status. Next year will be a different story, but I just want to know — could I get disqualified from the PSLF program if some years we file jointly and others separately? I always have a few words of advice (four step rule) that i always tell my friends and family when it comes to them because it has worked for me. I chose one and then entered the real world, where I learned, that most people who graduated from college did not even have an exit course and have absolutely no idea what they are doing with their student loans. REPAYE I remember sitting towards the front of the classroom, with a notepad and pen, and furiously scribbling notes throughout the entire thing. Additionally, I will walk you through our decision tree, to give you some insight as to why one of these was the option we chose. So glad I worked myself to death for 20 years to be debt free in the student loan department.” Meanwhile, I thought everyone else had it all figured out. But I was wrong. Currently single, but likely to be married after residency. I hope to live until well beyond that but who knows what tomorrow brings. As far as I can tell, it is still possible to switch back from REPAYE to IBR during repayment. I must have seen him on 7 different days outside of the required exit course. Review: PAYE vs RePAYE … What Could Happen If You Let Everything Go? Income-driven repayment plans like PAYE and REPAYE can be incredibly appealing to borrowers because after the repayment period is … Replies to my comments So at the beginning of our journey, everyone we consulted with said we had to choose between the following three student loan repayment options: IBR, PAYE, or REPAYE. The problem is that married filing separately has punitive tax brackets (i.e. -If filing joint tax returns, both spouses’ incomes and eligible debt is considered. Great explanation, I’ve been in the IBR program for 5 years now and work a public service job. Unfortunately, it’s a complicated analysis to figure out whether the increase in taxes you’ll pay under MFS is worth the lower monthly student loan payments, but that is the calculation you need to figure out. I’ll also be paying almost $5000/month, however, rather than the $140/month under REPAYE. -All Stafford loans or Grad Plus Loans disbursed on or after October 1, 2011. Hoping that her much lower AGI permits her to qualify, and it all gets squared up right before my forgiveness. The REPAYE and PAYE plan requires you to pay 10% of your discretionary income. Some borrowers aren’t eligible for PAYE and are therefore limited to IBR and REPAYE for PSLF qualification. So, without further ado, here are some facts I’ve learned that are worth passing along. The other issue that keeps coming up is that we’re California residents, and thus are living in a community property state. Mike didn’t believe we could do it given the numbers. Not only does REPAYE create lower payments for many borrowers, but it is also eligible for Public Service Student Loan Forgiveness (PSLF). The numbers won’t lie. Keep in mind that married filing separately is pretty bad for a whole host of reasons, not the least of which is that it doesn’t use the same tax brackets as you’d have if you were both single. Over the last couple of months, I’ve learned a few obscure facts about REPAYE (Revised Pay-As-You-Earn, IBR (Income Based Repayment) and PSLF (Public Service Loan Forgiveness) that are worth passing along. Turns out, you remain in the IBR program but your payments are capped at the 10-year monthly payment amount as discussed above. The information materials and opinions contained on this website are for general information purposes only, are not intended to constitute legal or other professional advice and should not be relied on or treated as a substitute for specific advice relevant to particular circumstances. My name is Samm. This led me to a series of life changes and discoveries about myself in my late twenties that shaped my lifestyle into what it is today. Well, the government didn’t agree. Have fun now, enjoy life while you are young, and worry about the debt later. The result is that a married couple could see their student loan payments jump to an amount higher than the 10-year standard repayment plan if 10% of their combined discretionary income is high enough. The forgiveness timelines between IBR, PAYE, and REPAYE are different (25 years, 20 years, and 20/25 undergraduate vs graduate, respectively). Here are 5 facts I've discovered about them. Drew make sure you run the numbers. Surely, when the exit course was being taught at USC, it was implied that the student loan repayment plan is the way to go. For REPAYE only, the agency also will pay 50% of unpaid interest on unsubsidized loans. They called it a course to make it sound official, but it was literally a one hour power-point presentation in a small classroom with mostly empty seats. Incredibly helpful! When you are married, you may choose to file your taxes separately or jointly. It would be really important to you if (e.g.) Here is the logic. Anyway, due to the fact that we make similar income, but I’m ~18 payments ahead of her (I am 2022, she is 2024) – we are going to explore switching her back to IBR. Second, comparing the effective interest rate under REPAYE and the refinancing interest rate is not apples to apples. https://ifap.ed.gov/fregisters/attachments/FR110112FinalRule.pdf. Hoping to then file separately, then after taxes have her submit for IBR using that return. Our incomes are about the same and the only deduction lost is my student loan interest by filing separate. Ultimately, the Department of Ed says servicers should use alternative sources of income (like your paystub) to verify your lower income amount (rather than the combined amount of you and your husband). So glad I found this site . Therefore, if either way I dedicate $5000/month to my student loans, for the first year in big law, I think it’s smarter to REPAYE and stash, rather than to refinance. As always, this one requires a calculator to see if you’re impacted. Imagine that you’re pursuing PSLF and have made 5 years of qualifying payments when you marry a fellow lawyer earning a $200,000 salary. Any idea where to view or track the number of years being counted towards REPAYE, IBR, other payment plans? Thanks for your kind words.I personally followed these steps to get my degree so i know it works.Keep in touch. I would like to reiterate that I am no expert. I assume you’ve run the math but is it really a better deal to seek forgiveness with the accompanying tax bomb than to just pay off the loans? PAYE offers loan forgiveness up to 5 years earlier than IBR. If you’re considering going the Public Service Loan Forgiveness (PSLF) route to pay off your student loans, you’ve probably already realized it’s a little more complicated than it first looks. Win for REPAYE. Some tardily strolled in, halfway through the presentation, just so they can sign the sign out sheets. My wife and I are both pharmacists. However, participation in REPAYE makes you eligible for the Public Service Loan Forgiveness (PSLF) program . If your loan is under FFEL program, you need to consolidate in order to get REPAYE. IBR has a higher payment formula (15% of discretionary income vs 10% for REPAYE). For something like this, I’d definitely recommend connecting with Student Loan Planner to get their thoughts. IBR student loan payments are 15% of your discretionary income but are capped at the monthly amount calculated by the standard 10-year repayment plan when you first entered repayment. Open to questioning society’s standards of success, I am finding ways to reach my life goals by refusing some things that we take for granted as the norm. Those filing designations only impact your monthly payments under IBR. As shown, both plans offer student loan forgiveness if you still have a balance at the end of your repayment term. 15% of discretionary income. Since everyone is working to build their careers and practices, what happens when you no longer have a financial need? As a visual person, here is the best way I could organize this information. In 2021, we will attempt to increase her retirement savings. Before I even started work, I reached out to a CFP because I felt that I needed help. However, PAYE has a couple of major advantages over RePAYE that swing the pendulum in its favor. Notify me of follow-up comments by email. If that’s a possibility, it’s worth thinking about all of these intricacies when you’re projecting a student loan payoff over 10 years (or longer). Throughout this entire process, all anyone would say (when I was bold enough to ask them about their repayment plan) was that they were going with the student loan repayment route. It wasn’t school itself that was on my mind. All I had an incurable case of senioritis, and I was ready to go. I had over 240K in with an interest rate of over 6%. Is there a likely scenario where you’re pursuing PSLF and make 61 or more payments while in the 10-year standard repayment plan? If payment does not satisfy monthly accrued interest, the Department of Education pays the remained for most subsidized Stafford loans for up to 3 years. Which is to say that I don’t think anyone can tell you with certainty that the IRS or someone else might look at your situation in the future and decide you weren’t paying enough. If you plan on executing this, you’ll need to do a lot of legwork and planning to make sure it happens without flaws (I’d love to talk to someone who has done it. I had reached all my requirements with a few months to spare. I live in OC with my husband, although we prefer to be traveling, and do so when we can. They do this stuff all day every day. That said, given how all these programs are run, as long as you are following the instructions provided for your servicer and providing them with all required information, it seems unlikely they will have the resources in the future to audit and review those decisions later (not to mention how patently unfair it is for you to be following their instructions and for them to later decide that they made a mistake in telling you how much to pay). We had meetings with the malpractice representative twice, and for disability insurance once more, after the required one. A standard repayment required a $6000 check being sent to My Great Lakes, every month for 10 years. It’s a huge pill to swallow. We focus more on experiences rather than material things. One thing to note, if you’re employed by a labor union while making the payments, you’re out of luck. For example, if you are currently not working due to disability or maternity leave, you pay a percentage of your income, which is $0. First, with the interest subsidy for REPAYE, the effective interest rate under REPAYE is better than many of the private refinancing options. She had issues similar to those presently up for forgiveness (that the feds are authorizing additional funds to handle) in that she was counseled into “extended payments” and told they would count towards PSLF. I’ve become more intentional with my life decisions, and am currently working towards buying my freedom from my massive loan, but not at the expense of giving up my life in exchange for grueling work hours. IBR allowed me to start my life (buy a home, feel comfortable starting a family, save and invest money). For individuals who do not live near a First Republic and therefore may only have access to refinancing options above 3% in the first place, REPAYE seems clearly better. I remember kicking myself for not studying this before, since my classmates appeared bored at best, presumably because they already knew the ins and outs of their loan repayment plans. If I refinance for a 5 year repayment with First Republic, for example, I’ll get a 1.95% rate. FedLoan had been certifying a bunch of people as meeting the requirements to be included in the Public Student Loan Forgiveness program and then later the Department of Education changed its mind and told them in reality those payments didn’t count. That is 120 consecutive payments of $6000. Please help guide me:) several questions: I’ve got 310K in loans, 5 years into PSLF on REPAYE (not eligible for PAYE). They don’t make it easy. 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