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Any benefits of standard repayment?

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Frequent Contributor

Any benefits of standard repayment?

So we are on income based repayment. We are going to pay off our loans in 3.5 years. We gonna be making $20,000 per month payments. Is there any benefit of standard repayment over IBR?
Message 1 of 7
6 REPLIES 6
Valued Contributor

Re: Any benefits of standard repayment?


@Green456 wrote:
So we are on income based repayment. We are going to pay off our loans in 3.5 years. We gonna be making $20,000 per month payments. Is there any benefit of standard repayment over IBR?

Not if you're wailing on it like you are.
I assume that even if you were on standard, you'd be making the same payments, so it doesn't matter.

FWIW - I'm on ICR and I'm paying extra as well.  Not at your level, but I'll also be paid off in ~26months.
I keep it on ICR just because I don't want to muddy the waters, and if I have some sort of emergency, I won't have to worry about paying more.




Garden goal: keep on keepin' on until 2020.
Message 2 of 7
Established Contributor

Re: Any benefits of standard repayment?

Do you mean your AGI will be $20,000 per month?

IBR eligibility ends at about $55k income per year. Or do you mean an Income-driven repayment plan in general?

Personally I agree with Calyx. I'd rather be obligated to less for the minimum payment and pay more (IDR) then be stuck with a large payment if I run into trouble.
Additionally there are benefits for a FHA loan if you're on an IDR plan that you might want to check out if that interests you.



Message 3 of 7
Frequent Contributor

Re: Any benefits of standard repayment?


@Sabii wrote:
Do you mean your AGI will be $20,000 per month?

IBR eligibility ends at about $55k income per year. Or do you mean an Income-driven repayment plan in general?

Personally I agree with Calyx. I'd rather be obligated to less for the minimum payment and pay more (IDR) then be stuck with a large payment if I run into trouble.
Additionally there are benefits for a FHA loan if you're on an IDR plan that you might want to check out if that interests you.

My income is way over $55,000 per year and I’m on IBR now. 

 

My wife and I are going to live on 10% of our income and put 40% on taxes and 50% towards loans hence $20,000 per month available cash. 

 

What I want to know is whether your interest gets capped or subsidized in different repayment plans. Or it basically makes no difference whatsoever except for lower monthly payment.

Message 4 of 7
Valued Contributor

Re: Any benefits of standard repayment?


@Green456 wrote:

@Sabii wrote:
Do you mean your AGI will be $20,000 per month?

IBR eligibility ends at about $55k income per year. Or do you mean an Income-driven repayment plan in general?

Personally I agree with Calyx. I'd rather be obligated to less for the minimum payment and pay more (IDR) then be stuck with a large payment if I run into trouble.
Additionally there are benefits for a FHA loan if you're on an IDR plan that you might want to check out if that interests you.

My income is way over $55,000 per year and I’m on IBR now. 

 

My wife and I are going to live on 10% of our income and put 40% on taxes and 50% towards loans hence $20,000 per month available cash. 

 

What I want to know is whether your interest gets capped or subsidized in different repayment plans. Or it basically makes no difference whatsoever except for lower monthly payment.


No difference, the apr is fixed.




Garden goal: keep on keepin' on until 2020.
Message 5 of 7
Established Contributor

Re: Any benefits of standard repayment?

You're right, you can make a higher wage and start on IBR.

Wait a minute, I remember you two now! Nelnet loans, 7.5 APR. You and your wife went to medical school and your loans are about 1M now, right? Last we talked I gave you a lot of information about IDR plans and loan forgiveness but you understandably were leaning towards paying them off in case PSLF continued to malfunction.

I rarely, rarely say this but given your circumstances, I actually agree with where you seemed to be leaning: refinancing. If you could get a private loan you could get a much lower APR, maybe even half that. You mentioned before how the (minimal?) payments didn't even cover the interest. In this case, on IBR (or for a much greater benefit REPAYE if you qualified), does have a temporary income subsidy. Not if you're talking about making larger payments to pay it off though. The additional benefit of any IDR plan is that the interest won't capitalize. Also not useful if you're already paying off the interest and a chunk of the principal. The most benefit you could get on either plan is consolidation (which might not be worth it depending on how the APRs will combine to come up with the final APR) and direct debit payments. This will only save you 0.25% I believe.
With the income of you and your wife, both of your debt, job security and the insurance, I would definitely say that if you could get a loan(s) for the amount then that would be a great savings to you both.
The other option might be to get a loan in a lesser amount, pay off that portion, put the loan in forbearance for a year and pay off the bank loan. At least that will be a portion that won't be at the higher APR.
As for your original question, neither plan is better or worse. You're kind of outside of most of the benefits of federal loans for it to make a difference.



Message 6 of 7
Frequent Contributor

Re: Any benefits of standard repayment?


@Sabii wrote:
You're right, you can make a higher wage and start on IBR.

Wait a minute, I remember you two now! Nelnet loans, 7.5 APR. You and your wife went to medical school and your loans are about 1M now, right? Last we talked I gave you a lot of information about IDR plans and loan forgiveness but you understandably were leaning towards paying them off in case PSLF continued to malfunction.

I rarely, rarely say this but given your circumstances, I actually agree with where you seemed to be leaning: refinancing. If you could get a private loan you could get a much lower APR, maybe even half that. You mentioned before how the (minimal?) payments didn't even cover the interest. In this case, on IBR (or for a much greater benefit REPAYE if you qualified), does have a temporary income subsidy. Not if you're talking about making larger payments to pay it off though. The additional benefit of any IDR plan is that the interest won't capitalize. Also not useful if you're already paying off the interest and a chunk of the principal. The most benefit you could get on either plan is consolidation (which might not be worth it depending on how the APRs will combine to come up with the final APR) and direct debit payments. This will only save you 0.25% I believe.
With the income of you and your wife, both of your debt, job security and the insurance, I would definitely say that if you could get a loan(s) for the amount then that would be a great savings to you both.
The other option might be to get a loan in a lesser amount, pay off that portion, put the loan in forbearance for a year and pay off the bank loan. At least that will be a portion that won't be at the higher APR.
As for your original question, neither plan is better or worse. You're kind of outside of most of the benefits of federal loans for it to make a difference.

Yeah I was checking in one more time as my wife is finishing her training and we are both off to maximum repayment mode.

Message 7 of 7
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