Guest Posted May 11, 2015 Share Posted May 11, 2015 I just got out of school and have been working at my current job in surgery for 2.5 months. It is a non-profit hospital. I was hoping to take an advantage of income-based repayment with loan forgiveness after 10 years. I have A LOT of loans. If I chose standard repayment, I would be paying $2000/month for 10 years. Rent here is not cheap. Paying $2000 a month for loans and $1600 minimum for rent (at least to start with) leaves me pennies to eat/make car payments, etc. I am aware that there are other options of paying for loans, like graduated payments which start with $1000/month and end with $3500/month after 20 years. There are also 30 year loan repayment programs... but that is a whole other discussion. Anyway... I called my loan provider today and they told me that if I chose IBR, my payment would be $100/month based on my income. That seems too good to be true... seems to be awfully low. I was expecting something to the order of $500-800.. I plan on giving them a call again to confirm. Anyway, $100 or $800 is better than $2000. I want to take an advantage of this program but it all seems too good to be true to me. On the one hand, the whole thing seems: "Doh, of course you should do it." On the other it seems to be a little risky...and maybe there is small text I haven't found yet that can screw me over later.. Has anyone done it? Would you recommend it? Thank you!:) Link to comment Share on other sites More sharing options...
greenmood Posted May 11, 2015 Share Posted May 11, 2015 I'm currently on IBR. I know, it seems ridiculous. My payments are around $450 per month, down from over $1200 before I started IBR. The first month I only had to pay $85. So far, there have been no downsides. Only been doing it for five months though. There very well may be some unpleasant surprises yet in store for me. Link to comment Share on other sites More sharing options...
Guest Posted May 11, 2015 Share Posted May 11, 2015 $450 seems more reasonable. I wonder if the guy heard me wrong and thought I was making a couple hundred a month.. hmm. Link to comment Share on other sites More sharing options...
GatorRRT Posted May 12, 2015 Share Posted May 12, 2015 The downside is the that total forgiveness is treated as taxable income if you don't work for a nonprofit Link to comment Share on other sites More sharing options...
loliz Posted May 12, 2015 Share Posted May 12, 2015 Usually the loan forgiveness part of it requires that you make 120 consecutive payments while working at a non-profit. Can be great... but if for any reason you have even a single month that you are not employed at a non-profit over the next ten years, the count starts over and you have stacked up a ton of interest on top of your initial debt. Link to comment Share on other sites More sharing options...
Moderator LT_Oneal_PAC Posted May 12, 2015 Moderator Share Posted May 12, 2015 Usually the loan forgiveness part of it requires that you make 120 consecutive payments while working at a non-profit. Can be great... but if for any reason you have even a single month that you are not employed at a non-profit over the next ten years, the count starts over and you have stacked up a ton of interest on top of your initial debt. Incorrect. The payments while you work for non profit do not have to be consecutive. You could work for a nonprofit for 5, private for 2, the non profit for another five and still get the forgiveness. Link to comment Share on other sites More sharing options...
greenmood Posted May 12, 2015 Share Posted May 12, 2015 loliz, that's not accurate. As LTJGonealPAC said, you do not have to work consecutively. You have to make a total of 120 payments before forgiveness and payments made while your loans are in forbearance (on interest, for example) do not count. But if you decide, for example, to take a few years off to care for kids, or travel the world, or work at a for-profit company, your total count doesn't start over. The payments you make in that time don't count towards your total but the qualifying payments you've already made don't disappear. Link to comment Share on other sites More sharing options...
Febrifuge Posted May 13, 2015 Share Posted May 13, 2015 I thought you had to be a full-time employee, as well. Is that correct? Because I've been working 0.4 FTE for a non-profit health system for almost 5 years now, and that's been a lot of loan payments, if not actually a lot of hours worked. Link to comment Share on other sites More sharing options...
Moderator LT_Oneal_PAC Posted May 13, 2015 Moderator Share Posted May 13, 2015 I thought you had to be a full-time employee, as well. Is that correct? Because I've been working 0.4 FTE for a non-profit health system for almost 5 years now, and that's been a lot of loan payments, if not actually a lot of hours worked. they consider 30 hours/week full time, I believe. Link to comment Share on other sites More sharing options...
loliz Posted May 13, 2015 Share Posted May 13, 2015 Well, that's great news!! Love to be proven wrong in cases such as this :) I looked into this awhile back and thought the rules seemed impossible to depend on, but this is much more flexible than I had thought. Link to comment Share on other sites More sharing options...
cinntsp Posted May 13, 2015 Share Posted May 13, 2015 The downside is the that total forgiveness is treated as taxable income if you don't work for a nonprofit The PSLF program is 10 years of repayment and is non-taxable. The standard discharge option is after 25 years and is taxable. Link to comment Share on other sites More sharing options...
greenmood Posted May 13, 2015 Share Posted May 13, 2015 The first people who could conceivably qualify for this will do so in 2017. I'm looking forward to seeing how it works out. I won't be eligible 'til 2021. Link to comment Share on other sites More sharing options...
lov2xlr8 Posted May 13, 2015 Share Posted May 13, 2015 Anyway... I called my loan provider today and they told me that if I chose IBR, my payment would be $100/month based on my income. That seems too good to be true... seems to be awfully low. If I had to guess, your payments will probably be 100/month for your first year. Something similar happened to me back when I began. I started my job in mid-September so at the end of the year, I hadn't made that much so the following year when the IBR kicked in, it looked like I was at the poverty level based on my w2 I turned in, therefore payed very little. Now, fast forward one year when I had made a full year salary, my payment went from 100/mmonth to 1100/month, sucked. All in all, this is the way to go if you're at a not for profit, I'm a to forgiveway a third of the way to forgiveness and will save a ton. Hope this made sense, typing on my phone which sucks (I really need this Tapatalk app). Link to comment Share on other sites More sharing options...
Boatswain2PA Posted May 13, 2015 Share Posted May 13, 2015 ...Paying $2000 a month for loans and $1600 minimum for rent (at least to start with) leaves me pennies to eat/make car payments, etc... Sweet Jesus..How much do you owe in student loans? $2000 a month is INSANE and should serve as a warning for future students!! And $1600 a month rent? That's almost $20,000 a year! I bought a 4 bedroom house with an over-the-garage apartment for less than that last year! (Seriously, paid $17K for it). This was in a good (not great) neighborhood in a bedroom community to a city of half-million people. You can vastly improve your quality of life by moving somewhere with a much lower cost of living. Link to comment Share on other sites More sharing options...
GatorRRT Posted May 13, 2015 Share Posted May 13, 2015 Sweet Jesus..How much do you owe in student loans? $2000 a month is INSANE and should serve as a warning for future students!! And $1600 a month rent? That's almost $20,000 a year! I bought a 4 bedroom house with an over-the-garage apartment for less than that last year! (Seriously, paid $17K for it). This was in a good (not great) neighborhood in a bedroom community to a city of half-million people. You can vastly improve your quality of life by moving somewhere with a much lower cost of living. 100-150k full boat for a private PA school is now the norm, not the exception. Link to comment Share on other sites More sharing options...
Boatswain2PA Posted May 13, 2015 Share Posted May 13, 2015 So $100-$150k in loans = $2000 a month repayment? I dont know....just asking. Link to comment Share on other sites More sharing options...
GatorRRT Posted May 14, 2015 Share Posted May 14, 2015 At 6.5% interest over 10 years, also don't forget undergraduate loans as well. Link to comment Share on other sites More sharing options...
Acebecker Posted May 14, 2015 Share Posted May 14, 2015 There is a HUGE downside to IBR. Your principal increases every month. At the rate that you are going, you're likely acrueing about $33/day in interest alone. If you stick with the IBR rate they advertise, you are $900 more in debt at the end of each month (approximately). That adds up super quick. IBR was a godsend for us initially, but we got hit by that "it's too good to be true" fairy pretty hard. It is too good to be true. Link to comment Share on other sites More sharing options...
delco714 Posted May 14, 2015 Share Posted May 14, 2015 $1200/mo-ish for wife and I 130k and $140k over a year in to repayment Link to comment Share on other sites More sharing options...
delco714 Posted May 14, 2015 Share Posted May 14, 2015 There is a HUGE downside to IBR. Your principal increases every month. At the rate that you are going, you're likely acrueing about $33/day in interest alone. If you stick with the IBR rate they advertise, you are $900 more in debt at the end of each month (approximately). That adds up super quick. IBR was a godsend for us initially, but we got hit by that "it's too good to be true" fairy pretty hard. It is too good to be true. But what when you get it forgiven? Does that matter? Link to comment Share on other sites More sharing options...
Moderator LT_Oneal_PAC Posted May 14, 2015 Moderator Share Posted May 14, 2015 But what when you get it forgiven? Does that matter? Heck, my payment is $0 a month for the first year. So technically I'm not paying any interest ;) Link to comment Share on other sites More sharing options...
Moderator LT_Oneal_PAC Posted May 14, 2015 Moderator Share Posted May 14, 2015 But I am in PAYE Link to comment Share on other sites More sharing options...
SoCalPA Posted May 14, 2015 Share Posted May 14, 2015 Can you explain PAYE a bit? The govt loan repayment programs are looking better and better!!! Link to comment Share on other sites More sharing options...
Moderator LT_Oneal_PAC Posted May 14, 2015 Moderator Share Posted May 14, 2015 Pay as you earn (PAYE) is where you pay 15% of your discretionary taxable income. Discretionary income is anything over poverty level for a family of your size. So for me, I have a family of three. Poverty level is about 28-30k for a family that size. Say I make 70k. So 15% of 40=6000. Divided by 12 = $500 dollars per month. But a significant portion of my pay is nontaxable housing allowance from the military, and my payments are calculated on last years tax return where I made 28k on HSCP, so I was (by their calculation) not making any discretionary income. So I have a zero dollar payment the first year. It'll probably be more like 350 next year for me since, again, a portion of my pay is nontaxable. Link to comment Share on other sites More sharing options...
greenmood Posted May 15, 2015 Share Posted May 15, 2015 But what when you get it forgiven? Does that matter? This is my question, too. I have realized that I am paying less than interest per month on some of my loans. These payments still qualify towards forgiveness which is why I was okay with it. I assume that when I file my taxes for 2015 that my 2016 payments will increase. It's anxiety-producing, but so was paying $1200/month on a plan that didn't qualify for forgiveness. Link to comment Share on other sites More sharing options...
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