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What to do... which way to go

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What to do... which way to go

My IBR is coming to an end and we likely won't qualify for it this year but I have filled out the paperwork just in case. According to studenloans.gov, if I do PAYE, I will  pay on the loans for 121 months 628/month with last payment being 649. If I do REPAYE, its 628/925 for 97 months. If I just do the standard I will be paying for 30yrs and 40 grand in interest. My loans are consolidated and my interest is fixed. I am scared to take on the large payment of 628 but 8yrs sounds better than 30+ there really is no chance at discharge after 20yrs on either PAYE or REPAY if I am paying them off in 8yrs. Thoughts? input?

Message 1 of 13
12 REPLIES 12
Community Leader
Valued Contributor

Re: What to do... which way to go

I take it from your "we" that you are married. Yes, the IBR plan has an income limit of about $50k. I take it from payments that large you'll have a high income. Keep in mind, IBR is unique in that if you are married and filing separately, it will only take into account your income. How long have you been on an Income-driven repayment plan in general? ( It might be useful to get them to send your qualifying payments count, btw. They'll say they can't do it because it's not PSLF, but they can.) This payments so far will count in your total years to forgiveness even if you switch IDR plans.

Depending on when you borrowed, this leaves you with usually PAYE or REPAYE. I don't think you qualify for both, but I could be wrong. I'm not as familiar with PAYE as I am with REPAYE. REPAYE will take into account your spouse's income but also your spouse's federal loan debt. There is also a weird payment you have to make to switch between the two plans. My REPAYE payments end up being lower than the estimator. And be aware the range is because they are taking into account significant, annual pay raises. I'll have to look up details on PAYE to see if it's the same.

The standard repayment plan is for 10 years. You will be required to make these payments. The loan will be paid off in full at the end of the ten year period. This differs from the IDR plans, which you can actually make those same higher payments for at your own choosing. Imo this makes IDR safer.
All-in-all, if there wasn't going to be anything forgiven at the end of the payment period I would make payments for the standard repayment amount or higher on an IDR plan of your choosing. If you give more details, such as loan amount, years, etc. I can give you a better answer.



Message 2 of 13
Valued Member

Re: What to do... which way to go

Yes I am married and have been on the IDR at 0.00 for a year. Loans are at 62271 consolidated and interest is fixed at 4.6% The calculator on studentloans.gov gives me on the standard 360 months @ 320.00 a month (I just learned this is because I am consolidated so 10yrs isn't an option) REPAYE is 633-962(final) for 96 months and PAYE is 633-649(final) for 121 months. The more I look into it the more it looks like standard repayment is the best option for us. Since REPAYE can actually go up as our income goes up and it may not save us as much interest in the long run. The standard repayment is easier to handle at the moment giving me more freedom to make extra payments as I can. My husband doesn't have loans and we don't file seperately which makes it impossible to only use my income which is significantly less than his.

Message 3 of 13
Senior Contributor

Re: What to do... which way to go


@Hippiechickens2022 wrote:

Yes I am married and have been on the IDR at 0.00 for a year. Loans are at 62271 consolidated and interest is fixed at 4.6% The calculator on studentloans.gov gives me on the standard 360 months @ 320.00 a month (I just learned this is because I am consolidated so 10yrs isn't an option) REPAYE is 633-962(final) for 96 months and PAYE is 633-649(final) for 121 months. The more I look into it the more it looks like standard repayment is the best option for us. Since REPAYE can actually go up as our income goes up and it may not save us as much interest in the long run. The standard repayment is easier to handle at the moment giving me more freedom to make extra payments as I can. My husband doesn't have loans and we don't file seperately which makes it impossible to only use my income which is significantly less than his.


You may want to do the calculations of what you would lose in taxes to what you would gain as far as student loan repayability.  My boss files separate from his wife, even though they take the tax hit, because the payment for her loans is so high (vet school) with both of their incomes, and they can't afford it with their lifestyle (two young kiddos in daycare).

If you're worried about repayment and interest, I would pick the lowest plan (as far as monthly payment) and just pay extra when you get the chance to lower your interest as you seem to be leaning towards.   That's what I'm currently doing, and it's worked out well for me (I am also consolidated).  It's way less stressful.  I have my student loan set up in my budget for my 'full' amount (payment + 500), but if I have a rough month, I can just make my regular payment and throw $500 at whatever emergency.

If your financial situation changes, you can always try to requalify for an IBR payment later.  It's not set in stone.


EQ: 798 | EX: 774 | TU: 771 | Accounts: 1/6 4/12 8/24
Message 4 of 13
Valued Contributor

Re: What to do... which way to go


@Hippiechickens2022 wrote:

Yes I am married and have been on the IDR at 0.00 for a year. Loans are at 62271 consolidated and interest is fixed at 4.6% The calculator on studentloans.gov gives me on the standard 360 months @ 320.00 a month (I just learned this is because I am consolidated so 10yrs isn't an option) REPAYE is 633-962(final) for 96 months and PAYE is 633-649(final) for 121 months. The more I look into it the more it looks like standard repayment is the best option for us. Since REPAYE can actually go up as our income goes up and it may not save us as much interest in the long run. The standard repayment is easier to handle at the moment giving me more freedom to make extra payments as I can. My husband doesn't have loans and we don't file seperately which makes it impossible to only use my income which is significantly less than his.


Even if the rates went up another percent or two, the significiantly shorter repayment period will still save you interest, and more importantly, allow you to be free of the debt sooner.

 

I recommend you take the shortest term you both can afford. If I could do my student loan repayment over again, I'd have declined all deferments and forebearances and scrimped to make the payments rather than making payments into my 40s. As it is, I paid more interest than I did principle over the life of the loan, so my degree cost me more than double what it should have.

 

Message 5 of 13
Community Leader
Valued Contributor

Re: What to do... which way to go

If you file separately, what does this lower your monthly payment to on IBR?

Btw, the range isn't really a range. The first number is what you'll likely pay now. The last night number is the amount you'll pay after your income increases at a rate the Dept of Education estimates. In addition to possible wage stagnation, it does not take into account income changes or loss.



Message 6 of 13
Valued Member

Re: What to do... which way to go

It said final payment on the cacluator

 

Message 7 of 13
Community Leader
Valued Contributor

Re: What to do... which way to go

Sort of. It's last monthly payment. It doesn't mean that the payments are the same until the last payment. These same ranges are given even when the loan ends in forgiveness, btw. If a different final payment than the rest of the payments were the case, why would have a final payment more than the usual minimum payment vs just having another month of payment and a reduced payment for the last payment?

It's not really clear but it's what you will be paying through the life of the loan, with income growth taken into account (3.5%?). So let's say over the course of 5 years, the first payment will be at your starting wages. 5 years later, with annual wage growth, you'll be making much more. So your payment increases. At the end of your loan, your last monthly payment would therefore be higher than your first monthly payment. However, this estimation clearly wouldn't apply to everyone. Your actual payments will be based on your income that you submit each year (or earlier if you choose, if it gives you a lower payment). So if you experience wage stagnation, this range becomes inaccurate. Your minimum payments will remain the same throughout the loan period (and if the person was up for loan forgiveness, the actual amount forgiven will likely be far greater than the estimator). If your wages increase at a greater annual rate, your minimum payments will more dramatic a range of first and last payments and will obviously result in a more decreased repayment period than estimated.

That's why it's an estimator, not a calculator. They have to give you numbers from cookie cutter circumstances. Personally, I only use it for the upcoming year and ignore the rest. Even then my numbers are way off because I recertify by timesheet to give me the lowest payment.

This article gives a better explanation than I probably can, with a sample payment chart from the estimator:
"Your monthly payment on IBR would be $86, a difference of $297 from what you are currently paying. If your income increases over time, your payments may increase. Assuming annual income growth of 3.5%, your final monthly payment would be $320. After making payments for ~25 years, you will have paid a total of $55,272 and would receive $29,204 in forgiveness, compared to your current plan where you will pay $45,960 over the next ~10 years."
https://studentloanhero.com/calculators/student-loan-income-based-repayment-calculator/

I'm open to corrections if this information is inaccurate.



Message 8 of 13
Valued Member

Re: What to do... which way to go


@Sabii wrote:
Sort of. It's last monthly payment. It doesn't mean that the payments are the same until the last payment. These same ranges are given even when the loan ends in forgiveness, btw. If a different final payment than the rest of the payments were the case, why would have a final payment more than the usual minimum payment vs just having another month of payment and a reduced payment for the last payment?

It's not really clear but it's what you will be paying through the life of the loan, with income growth taken into account (3.5%?). So let's say over the course of 5 years, the first payment will be at your starting wages. 5 years later, with annual wage growth, you'll be making much more. So your payment increases. At the end of your loan, your last monthly payment would therefore be higher than your first monthly payment. However, this estimation clearly wouldn't apply to everyone. Your actual payments will be based on your income that you submit each year (or earlier if you choose, if it gives you a lower payment). So if you experience wage stagnation, this range becomes inaccurate. Your minimum payments will remain the same throughout the loan period (and if the person was up for loan forgiveness, the actual amount forgiven will likely be far greater than the estimator). If your wages increase at a greater annual rate, your minimum payments will more dramatic a range of first and last payments and will obviously result in a more decreased repayment period than estimated.

That's why it's an estimator, not a calculator. They have to give you numbers from cookie cutter circumstances. Personally, I only use it for the upcoming year and ignore the rest. Even then my numbers are way off because I recertify by timesheet to give me the lowest payment.

This article gives a better explanation than I probably can, with a sample payment chart from the estimator:
"Your monthly payment on IBR would be $86, a difference of $297 from what you are currently paying. If your income increases over time, your payments may increase. Assuming annual income growth of 3.5%, your final monthly payment would be $320. After making payments for ~25 years, you will have paid a total of $55,272 and would receive $29,204 in forgiveness, compared to your current plan where you will pay $45,960 over the next ~10 years."
https://studentloanhero.com/calculators/student-loan-income-based-repayment-calculator/

I'm open to corrections if this information is inaccurate.

I will play with this a little more but I do not qualify for IBR any more.. we make too much money. so this calculator gives me a big fat blank and says I don't qualify

Message 9 of 13
Valued Member

Re: What to do... which way to go


@Sabii wrote:
If you file separately, what does this lower your monthly payment to on IBR?

Btw, the range isn't really a range. The first number is what you'll likely pay now. The last night number is the amount you'll pay after your income increases at a rate the Dept of Education estimates. In addition to possible wage stagnation, it does not take into account income changes or loss.

If we did file seperately it probably would lower my IBR or keep it at zero dollars. Unfortanetly it won't help me this recertifying year anyway. I also need to play with and see how bad we would take an IRS hit if we did file seperately. I am leaning toward standard repayment at this point. Most especially since I want to buy a house soon. Lower payments would help at least until my vehicles are paid off in 5yrs

 

Message 10 of 13
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