@Anonymous wrote:I still think it's a viable option for me. I am waiting to see if any FICO experts suggest that an IBR plan will present serious credit score risks. I learned through my research that the accruing interest will not capitalize until the borrower is no longer considered in partial financial hardship. With loans as hefty as mine, this would not occur unless I began earning a salary of approximately $200,000/year. Yikes!
Are you sure that's correct? And, if so, can you point me in the direction of some sort of supporting documentation? (I'm asking solely for personal reasons, as I'm also a law school graduate with - unfortunately - substantially greater debt, and I did not know about the partial financial hardship/non-accruing interest.)
This raises another question though. Would accrued, but uncapitalized, interest even show up on a FICO report?
My credit reports shows the "balance" as of the date pulled (or, more accurately, the date last reported). It's not clear whether this includes the principal plus outstanding, uncapitalized interest, but I assume it does. Still, I would expect the balance won't have any significant negative implications for your credit score, as it's an installment account that should be reporting regular, on-time payments. Those two factors are much more important than the amount of the obligation.
Starting Score: 732 (EQ)
@Anonymous wrote:
@lolabelle wrote:
@Anonymous wrote:I still think it's a viable option for me. I am waiting to see if any FICO experts suggest that an IBR plan will present serious credit score risks. I learned through my research that the accruing interest will not capitalize until the borrower is no longer considered in partial financial hardship. With loans as hefty as mine, this would not occur unless I began earning a salary of approximately $200,000/year. Yikes!
Are you sure that's correct? And, if so, can you point me in the direction of some sort of supporting documentation? (I'm asking solely for personal reasons, as I'm also a law school graduate with - unfortunately - substantially greater debt, and I did not know about the partial financial hardship/non-accruing interest.)
I think you may have misunderstood what I said. The interest will accrue while you are in partial financial hardship, but it will not capitalize, or be added to your principal balance, until you are out of financial hardship or your loan changes (either through consolidation or through selecting a new payment plan). This is important because if your loan payment is not enough to cover the accruing interest then your loan could snowball very quickly if you were paying interest on your accrued interest. Essentially, your accruing interest per month will remain the same as long as your balance stays the same. The accrued interest is not added to your balance, or capitalized, unless you change your repayment options/consolidate or you no longer qualify for IBR. In the latter situation, you are not kicked out of IBR, but any accrued interest will be capitalized at that point. Does this make sense?
If you were not confused and simply wanted to know where I got the info about the interest not capitalizing, let me know, and I will pull my source.
Ah, okay - you're right. I did misunderstand. Thanks for explaining! 
Do you know if partial financial hardship is a determination that is significant only for IBR? I took myself off of IBR recently because not all of my loans are in repayment. They will be in November, though, and this would be as good a reason as any to go back on the IBR plan.
Ah, okay - you're right. I did misunderstand. Thanks for explaining!
Do you know if partial financial hardship is a determination that is significant only for IBR? I took myself off of IBR recently because not all of my loans are in repayment. They will be in November, though, and this would be as good a reason as any to go back on the IBR plan.
Based on my research, it makes sense for you to go back on IBR now. I had a similar question with my lenders because I have some loans from undergraduate as well as for law school. My undergraduate loans no longer have a grace period on them so they will enter repayment in August while my other federal loans for law school will not enter repayment until February.
Here's what I learned: once your IBR payment is calculated, each lender is given their proportional share of your monthly payment. All of your loans are considered as long as they will be in repayment within the year (12 months from when your IBR calculation is made). Using my figures as an example my undergraduate loans account for approximately 10% of my entire student loan debt. With an IBR payment of $630/month, $63 each month will go to my undergraduate lenders. What I did not learn until yesterday was that this is the case regardless of whether the loans are all in repayment. As long as the all of the loans will be in repayment within 12 months of you going back into IBR, then all of the loans are considered when coming up with the loan percentages. It makes sense if you think about it. SInce the loans will be in repayment before you are able to recalculate your IBR liability annually, the lenders have to take all of your loans into consideration even though they are not all in repayment at the same time.
Back to my example with my undergraduate and graduate loans. I will only have to pay 10% of my IBR payment to my undergraduate loans even though my graduate loans will not be in repayment until 4 or 5 months later. For me this is going to be a great opportunity to save up some cash for an emergency fund. At first I thought I would have to fork the entire 630/month over to the loans that only make up 10% of my debt until the other loans entered repayment.
Hopefully this makes sense. As always, check with your individual lenders to confirm what I learned from mine before making any decisions.
@Anonymous wrote:Ah, okay - you're right. I did misunderstand. Thanks for explaining!
Do you know if partial financial hardship is a determination that is significant only for IBR? I took myself off of IBR recently because not all of my loans are in repayment. They will be in November, though, and this would be as good a reason as any to go back on the IBR plan.
Based on my research, it makes sense for you to go back on IBR now. I had a similar question with my lenders because I have some loans from undergraduate as well as for law school. My undergraduate loans no longer have a grace period on them so they will enter repayment in August while my other federal loans for law school will not enter repayment until February.
Here's what I learned: once your IBR payment is calculated, each lender is given their proportional share of your monthly payment. All of your loans are considered as long as they will be in repayment within the year (12 months from when your IBR calculation is made). Using my figures as an example my undergraduate loans account for approximately 10% of my entire student loan debt. With an IBR payment of $630/month, $63 each month will go to my undergraduate lenders. What I did not learn until yesterday was that this is the case regardless of whether the loans are all in repayment. As long as the all of the loans will be in repayment within 12 months of you going back into IBR, then all of the loans are considered when coming up with the loan percentages. It makes sense if you think about it. SInce the loans will be in repayment before you are able to recalculate your IBR liability annually, the lenders have to take all of your loans into consideration even though they are not all in repayment at the same time.
Back to my example with my undergraduate and graduate loans. I will only have to pay 10% of my IBR payment to my undergraduate loans even though my graduate loans will not be in repayment until 4 or 5 months later. For me this is going to be a great opportunity to save up some cash for an emergency fund. At first I thought I would have to fork the entire 630/month over to the loans that only make up 10% of my debt until the other loans entered repayment.
Hopefully this makes sense. As always, check with your individual lenders to confirm what I learned from mine before making any decisions.
That's really interesting. I have my undergrad and law school loans consolidated, but then I have a PLUS loan from the LLM program I just finished. (That's the one that will go into repayment in November.) The payment on the PLUS loan on the level program (which I won't do) is quite high - over 2/3 of the entire amount I would have to pay for all of my federal loans combined under IBR. When I first went into repayment on the consolidation loan, I applied for IBR. They were going to apply the full amount to just my consolidation loan until the PLUS loan went into repayment, though. I decided to go with the lowest payment plan until November instead to save some money, since the consolidation loan has such a low interest rate.
It sounds like you have a much better deal, which is fantastic.
Back to the question at hand - I wouldn't worry too much about the FICO scoring. Just pay on time and you should be good to go.
@Anonymous wrote:I would definitely try again with your consolidated lender. It should have to consider the larger loan when calculating its IBR portion, especially since we're within 12 months of November. When did you apply for IBR last time? Was it between November '11 and now? If they won't take your other loans entering repayment into consideration then then you would have to fill out IBR paperwork every time something changes. IBR calculations should be made on an annual basis unless you choose to file paperwork indicating a change.
I think you're right about the FICO numbers. I checked my score yesterday and had a 767 with FICO. I don't believe that my accrued interest will show up on my report, so it will just continue to show my low monthly payment with no flags.
I applied recently - at the beginning of May, I believe. My understanding is that, under IBR, you pay what the formula says you can pay based on your income. So, if (purely hypothetically) my income supports a payment of $1,000/month toward my student loans according to the IBR calculation, then I pay $1,000. If I have a loan that is not yet in repayment, the $1,000 is applied only to the student loans that are currently in repayment. When the other loan goes into repayment, I will continue to pay the same amount, but some of the payment amount will now also be applied to that loan. The IBR calculation still only occurs on an annual basis.
My IBR payment is a lot higher than the lowest possible payment on my consolidation loan, so I decided to wait to go on the IBR plan until the remainder of my loans go into repayment, since the consolidation loan isn't accruing very much interest, so most of my payment goes to principal. At that time, the IBR payment will be lower than the sum of the individual payments for each loan, even if I select the lowest possible payment (Extended Graduated).