SO CONFUSED about ICR vs IBR

[goodygoody]

Hi there, 

I have huge students loans (started around $70,000, but with all the interest they're up to over $100,000) .  I've had Income Contingent repayment for about  6 years now, which I've paid faithfully (my payment's been between $40 and $144 the whole time because I have 4 kids).  I just did my renewal, and when I put my info into the calculator, it's looking like my payment is going to go up to $300.  The Income-Based calculator is saying my payment would be $40 (!) under that plan.  I have tried to figure out A) if I can switch plans and B) If there's a possibility that my payment could balloon up in the future on IBR (which is something I've heard people mention on here).  I'm married, and my husband is finishing school in the fall, so at that point we'll have his loans too, so I also wonder if we can combine our loans in one payment plan (I know we can do this on ICR, but I can't figure out from websites if we can do this on IBR).  Finally, can we get a real "quote" or something without actually applying to switch?  I don't want to switch and then find out it's made things worse.   

Anyone have an opinion or knowledge about whether switching is a good idea?  If we can pay $40 instead of $300, that would be great, because we are also trying to pay off all our credit card debt and save for a house.  So keeping more cash is way better for us. 

P.S. - And yes, I know I was a complete moron to get into this much student loan debt.  I was a single mom at the time, and basically paid my rent for the whole semester  and $400 a month in child care for 4+ years with my loan refunds.   

[Jazzzy]

Have you called your loan servicer and asked them? I consolidated my loans through Direct Loans at one time and had a great conversation with them about which way I should go.

I was in the position of having about $60,000 in loans and had just gotten out of school. My income was very low....so I almost did an income based payment plan. They asked me what I thought my salary would be within 2 years. It would have been high enough that my payment would have jumped substantially. They warned me that once I got on an income-based plan that it was almost impossible to get off, and in the end my payment would be higher than they were with the already stretched out payments (because of the total amount they could be stretched over a longer period of time). In my case, an income based payment plan would not have been the way to go.

Call them and have a conversation.

(In my case, the feds paid off my loans anyway after I'd been out of school a couple of years, but it was nice to have the lower payment while they were still my responsibility.)

[trix_r_4_kids]

You didn't specify what kind of loans you have.  I'm going to assume they are direct.  As you may be aware, there are several repayment plans available.  The differences lie in the formulas used to calculate your monthly payment.  Basically, IBR caps at 15% of the amount by which your income exceeds 150% of the federal poverty level.  You usually need to show financial hardship for IBR.  You do not need a financial hardship for ICR.  ICR is calculated from your AGI, family size, loan amount, and interest rate.

IBR is usually less per month, but you may pay more in interest over the life of the loan.  Your servicer should be able to run different scenarios for you.  A breakdown of the repayment plans can be found here: http://studentaid.ed.gov/repay-loans/understand/plans

One caveat -- do NOT consolidate your loans with your husband.  If one of you passes away, the other is still responsible for the loan.  You can each consolidate your loans separately.  Each of your payments will be calculated when figuring out your repayment options.

[goodygoody]

Thank you - but I wonder, if we don't consolidate, won't we end up with even higher payments?  Because unless I'm mistaken, we would each still have to report the other's income for ICR.  Or does the program take spouse's loans into account when calculating the payment?  It would be great not to be responsible just in case, but also don't want to have unaffordable double payments... 

We do have Direct Loans.

Also wondering if IBR is always capped at 15%, seems like it would always be affordable based on income.  But maybe I'm missing something. A rep at the lender once told me that there are different "tiers" for ICR, so like last year we got bumped out of the lower tier where we were paying $40, and our payment went up by $100 a month without a huge increase in income.  So it seems like maybe knowing you would always be paying a certain percentage would be better?  Again, I'm sure I could be missing something here.

[goodygoody]

Oh, also, I believe we would qualify for a hardship because my loans are so high, and our income is just average (around $50,000 with a family size of 6).

[trix_r_4_kids]

You may qualify for hardship.  The only way to know for sure is to contact your servicer.  If you don't qualify for hardship, they can run different scenarios for you to see what would work best in your given situation.  There are a number of different repayment options available.