Switching from Standard to PAYE

[dccordell]

I am planning to buy a house within the next year, and since my wife's credit scores are lower than mine, we aren't going to include her on the loan. That means we can't use her income to qualify. My income is just barely enough, given my debts, so I'm looking for a way to lower my monthly debt payments temporarily.

I'm currently in the 10yr standard repayment plan, with about $47k remaining with Sallie Mae (Direct and FFEL loans). It seems as though I could consolidate these loans all into the direct consolidation program, and then enter into the Pay As You Earn (PAYE) plan. This should drop my monthly payments quite a bit (currently at $550/mo).

Does this seem like a bad idea for any reason? I would still be paying the normal amount that I pay now, I just need the flexibility to have the lower payment show on my credit report. I understand that making lower payments means it would take longer to pay off, but it seems harmless if I keep making the same payment as now.

What do you all think?

[SCF]

There's aboslutely no downside to doing what you describe, income-based payment plans are a tool that's available to all Federal student loan borrowers and there's no harm to your credit by using them.  You would wind up paying some more interest if you stuck with the lower payment amount, but that won't be an issue with the plan you describe.

You will want to check how your mortgage lender will look at the payment plan, however, because some lenders will only use the standard repayment term, or will only use the reduced payment amount if it will be in effect for a certain # of months.  I'm not an expert on this, so you might want to make a post over in the mortgage forums.