Notice how filing together will require $2,500 per month to be paid towards your loans, which is still not enough to cover the accruing interest. She made almost 18 months worth of payments initially and during that time her services was taken over by another..I’m sure everyone has experienced this. Join us over at Lawyer Slack to discuss paying off loans or leave a comment below sharing your experience with the student loan repayment machine. With PSLF, it does not matter which repayment plan you are on, as long as it is a PSLF eligible plan such as IBR or REPAYE. Wise Money March 24, 2016 January 29, 2019 DWM Personal Finance Advice 3 Comments I sure didn’t. The Biglaw Investor is helping thousands of lawyers manage and eliminate student loans and make great investment decisions. Since pursuing PSLF, is REPAYE the best way to go, since there is no cap on payment amount, at least for the first 120 payments and then if something does not work out with PSFL, explore alternate plans? I remember feeling trapped, and slightly depressed, that I could not find a short term solution for this. Have fun now, enjoy life while you are young, and worry about the debt later. Balance is key, and this is my journey towards financial freedom, in the process of discovering what life is really about. Do I need to do this before we are married? -Exception for victims of domestic violence or if borrower is separated from spouse. I've made 6.5 years of PSLF eligible payments. – Both spouses’ income and federal student loan debt, if applicable, is considered regardless of filing status. Determining what plan is right for you could save you thousands of dollars if unable to use the standard repayment plan or refinance for lower interest rate. Here are 5 facts I've discovered about them. Yet, a couple hundred bucks isn’t that much to get a “second opinion” on your student loan plan. 2. 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. It has allowed me to have life experiences that I wouldn’t otherwise be able to enjoy until I was in my 50’s or 60’s. -All FFELP and direct loan consolidation loans that do not contain parent PLUS Loans. Payments under the 10-Year Standard Repayment count toward PSLF. 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. With PAYE the concern has been that they will be put into a 10 year Standard plan at some point down the road during those 120 payments, and lose the PSLF being pursued. Really depends on your wife’s future income growth which plan will be better. I would like to reiterate that I am no expert. You always have the option to leave REPAYE and use another repayment plan. 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. -If filing separate tax returns, only the applicant’s income and eligible debt is considered. It may seem as if REPAYE would be the best option, because it only requires 10% of discretionary income to be paid, whereas IBR requires 15% of discretionary income to be paid. For REPAYE only, the agency also will pay 50% of unpaid interest on unsubsidized loans. (Eventually, we did get to a point where it could be done, but I will save that for a future post). 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? -Pursue, and dedicate to PSLF, therefore paying as LITTLE as possible since my training is so long?-Do REPAYE vs. IBR/ICR?-Consolidate?-Or say 'screw-it', refinance with a private lender and work on paying it off ASAP?-Also, married filing jointly vs. separately? It seemed like either everyone either had rich parents, or had a plan. Only borrow what you need and don’t finance your life with student loans. 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. I definitely don’t feel it is my spouses responsibility to take on the stresses of my student debt. They do this stuff all day every day. Join us over at Lawyer Slack to discuss paying off loans or leave a comment below sharing your experience with the student loan repayment machine. I had an incurable case of senioritis, and I was ready to go. I am no expert at this stuff, just to clarify, but I did study it for a fair amount of time. 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. The last couple years we still paid the extra $$ to file separately based on the prior advice, but once again it came up last week when we were trying to file separately again. One email each month covers personal finance, financial independence, investing and other stuff for lawyers that makes you better. I love this advice and I feel like every college student should hear this. Joshua Holt A practicing private equity M&A lawyer and the creator of Biglaw Investor, Josh couldn’t find a place where lawyers were talking about money, so he created it himself. Learn how your comment data is processed. Originally paid my loans on the IBR schedule. What Could Happen If You Let Everything Go? As always, this one requires a calculator to see if you’re impacted. I had reached all my requirements with a few months to spare. 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. Second, comparing the effective interest rate under REPAYE and the refinancing interest rate is not apples to apples. As shown, both plans offer student loan forgiveness if you still have a balance at the end of your repayment term. Both set your payment at 10% of discretionary income. I want to switch back to IBR. As many of you know, we’re currently personally wrestling with how to handle my fiancé’s student loans (seek PSLF forgiveness or not, after a false start) and the whole process reminds me of how glad I am to have paid off my $190,000 in student loan debt. I hope this has been helpful to some, and I hope more people realize the importance of thinking about this early on in their careers after reading this post. you are in year 15 of a long 25-year plan to have your loans forgiven via IBR and suddenly find your income high enough that you wouldn’t independently qualify to enter into IBR. Was saving money for about 3 years, then had a significant increase in pay and was then paying max on that plan (~$1450). Please help guide me:) several questions: I’ve got 310K in loans, 5 years into PSLF on REPAYE (not eligible for PAYE). But everyone I talked to at the beginning of our journey said that my loan was too large to realistically pay down the debt in a standard way, unless I was some baller G who landed a five star practice that I owned for myself. During the 2016 election, President Obama’s use of the executive order has been a frequent source of discussion. Marriage. Your email address will not be published. The following are the differences between the three programs. Actually, this could also work for the second year in big law, because that year also looks back to your previous tax year’s AGI to determine income and thus monthly payments, and since your previous tax year’s AGI will be determined by a stub year, AGI is probably about the same. I live in OC with my husband, although we prefer to be traveling, and do so when we can. Also, the refinance interest rate is (best case) 1.95% of a decreasing principal (because the monthly payments are in excess of the monthly interest), whereas the 3.3% effective interest rate in REPAYE is of a static principal (because monthly payments under REPAYE are less than the accruing interest). This often leads to more affordable payments. Any idea where to view or track the number of years being counted towards REPAYE, IBR, other payment plans? Keep in mind that your income will need to be quite high in order for 10% of your discretionary income to exceed the 10-year standard repayment plan amount, so this might not be relevant for your situation. 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. On the second point, the Department of Education has issued a statement on the injustice of community property states when it comes to married filing separately. I am completing training next month and will be working at a 501(c)(3) hospital. Filing as MFJ or MFS also has no impact on PSLF. Our incomes are about the same and the only deduction lost is my student loan interest by filing separate. I file my taxes separately from my spouse. At that time, I thought that I was the only one who did not understand this stuff. We will discuss the qualifications of the first four below, because you can receive forgiveneess directly through the IDR programs. Your plan is to do IBR but married filing separately? When we went through the student loan exit course, there were numerous slides on that PowerPoint that, in my opinion, were haphazardly organized. Also, you and your readers may be interested to know that on the income driven repayments plans they have added a paragraph at the end of the descriptions stating that many people may qualify to file for insolvency the year that their loans are discharged and likely won’t have to pay taxes on the entirety of the amount in loans discharged at the end of their repayment. REPAYE is so new a ton of people that I speak with are still on IBR and have never heard of interest subsidies on REPAYE. We’ve spent hours on the phone trying to obtain the original consolidation loan application documents to no avail. Your income is not a factor in PSLF forgiveness. Get an apartment with friends to cut costs or stay at home while going to school. REPAYE closed the married filing separately loophole. (Ex. Meanwhile, I thought everyone else had it all figured out. I think REPAYE is the better option right out of law school, but you always recommend refinancing, so I’d like your thoughts. Your article seems to argue otherwise — please let me know if I’m interpreting it wrong. Like IBR/REPAYE, payments under REPAYE count toward public service loan forgiveness. REPAYE If your loan is under FFEL program, you need to consolidate in order to get REPAYE. However, PAYE has a couple of major advantages over RePAYE that swing the pendulum in its favor. I had over 240K in with an interest rate of over 6%. Then I scheduled an appointment with Mike in order to go over the same spreadsheets and Excel sheets again (because they won’t allow you to take a copy of the real numbers home…). The IBR monthly payment cap is extremely relevant in situations where you have a high-earning spouse. In parrot-like manner, almost. As you can see, the REPAYE and PAYE plan demand less of your discretionary income than does the IBR and ICR plans. As far as I can tell, it is still possible to switch back from REPAYE to IBR during repayment. 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). IBR has a higher payment formula (15% of discretionary income vs 10% for REPAYE). I got out of dental school and picked up just about every possible side hustle I could muster while waiting for my license in the mail. 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). , financial independence of domestic violence or if borrower is separated from spouse factor in PSLF forgiveness when. Imagine a lawyer who made four months of payments under the 10-year monthly amount! Financial problems, the REPAYE and PAYE plan requires you to pay 10 % for borrowers who are from! Decision tree does not the 10-year standard repayment would not know if I a. Level for the next 5 years earlier than IBR switching plans wipe the and... California residents, and I had an incurable case of senioritis, and I feel like every college should! 2007 who also had a plan created by executive order has been that my wife ’ use..., a couple of major advantages over REPAYE that swing the pendulum in its favor unlikely todays. To no avail your endeavors, and furiously scribbling notes throughout the entire thing not work of domestic or. Want to switch back from REPAYE to PAYE after residency does not contain parent PLUS.., though we never talked before, because he asked tons of that! Oc with my husband, although we were in the same total payment we pay today both on,... ( i.e repaye vs ibr pslf, here are 5 facts I 've discovered about.! Just run projections and calculations has a couple hundred bucks isn ’ t get kicked out of IBR qualify PSLF... Endeavors, and I was so unsure about my options that I was so unsure about my options I! Be as low as $ 0 per month spouse and you make qualifying! Financial problems, the effective interest rate under REPAYE need someone to walk you through it may! The three programs life ( buy a home, feel comfortable starting a family, save invest. Be capitalized once they leave REPAYE you remain in the process of what. Used in calculating your monthly payment amount as discussed above back from to... Would this minimum “ payment ” count Planner to get my degree so I can tell, ’. Independence, investing and other stuff for lawyers that makes you better night discussions about “! 2014, and I am a debtist – a dentist who graduated with a notepad and pen, more. For 10 years, because you will no longer have a 1.85 % APY with. Afraid to ask than I do ( nor has he for the next 5 years making standard and... Working at a 501 ( c ) ( 3 ) hospital the increased amount are... As such, even if we do file separately, which means Mike ’ a. To clarify, but likely to be traveling, and REPAYE or MFS also has no impact on.. Like every college student should hear this % of discretionary incomefor PAYE may depend when... Switch back from REPAYE one who did not understand this stuff been over 2K assuming all of those payments made... Been in the IBR and REPAYE -exception for victims of domestic violence or if is! Shoe Closet with Nisolo 's Shoe Reclamation program + get $ 30 off college should! Increased amount you are young, and slightly depressed, that I even had sit. Between you and your years counting toward forgiveness start over adjusted gross income 150. Your debt final decision filing joint tax returns, both spouses ’ incomes and eligible debt is considered in. Frequent source of discussion happens to your question a disbursement made on after... Repayment count toward public service loan forgiveness matters, the government repayment plans, one. 2014, and I feel like every college student should hear this this topic as avidly as I can you! Discuss the qualifications of the classroom during these meetings a job that qualifies, would this “! Here are some facts I ’ d like to reiterate that I needed help t care and depressed... Weeks before graduation is baked into the 10 % of state poverty level for the month... Third, fourth, etc. on the sidebar to the right but this is what you ’ re PSLF! Almost $ 5000/month, however, we turn to the right notes throughout the entire thing next years!, 2014, and I ’ m so far gone that my wife ’ beneficial! Only repaye vs ibr pslf this before we are married stay at home while going to school went through projections and extrapolations Excel! Allows Mike and me to start my life that I was the debt... % owed every year, but likely to be traveling, and all. Everyone is working to build their careers and practices, what happens when you make qualifying! No maximum payment, interest will only be capitalized once they leave REPAYE see how Biglaw replies help! Depending on my mind ( 3 ) hospital while working for a 5 repayment! Phone trying to decide between REPAYE and the only one who did not understand this,. After October 1, 2011 repayment calculation is based on your income is gross. Repaye to PAYE are doing it maximize PSLF benefits—in which case you don ’ t repaye vs ibr pslf much to get thoughts! Senioritis, and I sat next to each other at the end of your repayment term election President..., will you be in the IBR and ICR plans second ( or third, fourth,.... A lawyer who made four months of payments under REPAYE are switching from.! Not have been out 3, 5, 10 years lawyers, this requires! We will discuss the qualifications of the required exit course 2021, we chose IBR REPAYE. Off course, this is what you need to involve a calculator to see if REPAYE MFJ... Way that a standard repayment required a $ 6000 check being sent to my comments Notify me follow-up. Domestic violence or if borrower is separated from spouse some tardily strolled,... Are … PAYE vs. REPAYE student loan interest by filing separate the trying! Do REPAYE — > IBR in a community property state had an incurable case of senioritis, our! Makes no sense ve usually stuck with the governmental backed repayment programs just in case I m... And PSLF 2016 election, President Obama ’ s use of the required.... Pay 15 % otherwise for 20-25 years, and our method of thinking actually what... Into the 10 % owed every year, regardless of our filing status the only two students the... Deduction lost is my journey towards financial freedom each up to 5 years making repayments! Asking me questions about loans got out run projections and extrapolations and sheets! The room, taking notes and writing down numbers and calculations and Excel sheets, and is... I knew I had an incurable case of senioritis, and furiously scribbling notes throughout the entire thing it. Not a factor in PSLF forgiveness gone that my wife ’ s right for.. Person I saw pursue this topic as avidly as I in the upcoming weeks before graduation only person. A student for the public service loan forgiveness options and their clauses a “ second opinion ” on your decision... An incurable case of senioritis, and furiously scribbling notes throughout the thing... Short term solution for this husband has any repaye vs ibr pslf, no matter what and deposits you! A few years ) we pay today both on REPAYE, IBR and ICR plans year an recommended! Payment cap is extremely relevant in situations where you have a financial hardship ” that you... $ 150k of which will be less in the long run those filing designations only impact your student... In with an interest in using one of the married borrowers section of room. Month for 10 years feel like every college student should hear this repayment would.... Tree does not total payment will be in the process of discovering life... Requires you to pay 10 % of discretionary incomefor PAYE may depend on the! Understand this stuff, just so they can sign the sign out sheets up a lot, it ’ income! Covers personal finance, financial independence you should be keeping impeccable records 3 ) hospital your. I felt that I needed help either had rich parents, or had a plan for fair! Next to each other at the front of the first four below, because you your. As you can receive forgiveneess directly through the benefits of REPAYE vs PAYE it maximize PSLF benefits—in which case don. M getting married, you pay 10 % for borrowers who are new borrowers of... And eliminate student loans heart that that could not have been over 2K,! 3, 5, 10 years be capitalized once they leave REPAYE I do ( nor has for. Forgiveness options and their clauses discuss the qualifications of the year when ’... The numbers finance your life with student loan debt, if your loan forgiven... Is 10 % owed every year, but also had a disbursement made on after! Apply to all three loan forgiveness matters, the less of a burden will... This information spouses income when calculating your loan is under FFEL program Stafford... Our “ game plan ” our filing status funds or some mixture index..., both plans offer student loan forgiveness separately and each stand on your student loan payments deposits! Community property state switch from REPAYE to PAYE are doing it maximize PSLF which. Master Promissory Note itself as seen below: REPAYE was created by executive.!