IBR with loan forgiveness help

[GatorRRT]

With the interest in the IBR repayment plan, the government covers it for either 2-3 years. After that time if your payments aren't enough to cover principal and interest, it's added on to your tab. Does it matter? Depends. There has been some discussion about capping total forgiveness with PSLF at 50kish. Still up in the air wether we will be grandfathered in or not. So depending on your debt load, it could bite you. Hard,

[zoopeda]

A good amount of misinformation swirling.  From the horse's mouth: 

http://www.ibrinfo.org/faq.vp.html 

Payment Calculator (click "Proceed"): https://studentloans.gov/myDirectLoan/mobile/repayment/repaymentEstimator.action 

 

Greatest hits: 120 payments do NOT have to be consecutive; amount forgiven at the end IS considered taxable income even if you work for a non profit; the ENTIRE remaining loan balance (interest AND principle) is eligible for forgiveness as long as all criteria are met and loans are eligible (i.e. not consolidated with other certain types of loan; "full time" is ONLY considered to be 30 hrs per week if your employer does not define a company standard for such designation (extremely rare, in my experience)--meaning, if your employer sets full time contracts and corresponding benefits packages at 40 hours per week, you must work 40 hours per week to qualify (the exception being if you have multiple contracts working at more than one non profit).  

 

And yes, as Sallie Mae reps have confirmed for me over the phone, at any given moment, in any given political climate, the government could change the way IBR works or take forgiveness away entirely--regardless of whether you've made one payment or 119...

[zoopeda]

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. 

 

This "downside" only applies to those who end up paying off 100% of their loans in 10 years.  

 

Using the IBR payment calculator, assuming $100k balance at graduation and 6.5% interest (unsubsidized), a $90k adj income, and a family of 1 (i.e. all somewhat conservative numbers to push UP the monthly payment), monthly payment is $1135, and this amount will be repaid in 10 years (meaning maximum interest accrual and zero forgiveness needed).  IBR is really only helpful for those who sacrifice income to work for a non profit.  Even at $65k a year, single, supporting two kids, monthly payment is still $1135, and no forgiveness happens (since all will be paid off in 10 years).  By the way, to get a $2000 per month IBR payment (10 year plan), I plugged in $175k in debt, single, family of 3, 6.5%, and adjusted income of $65,000.  Moving any of those numbers will change things though.  https://studentloans.gov/myDirectLoan/mobile/repayment/repaymentEstimator.action  IBR is therefore in place for those who encounter economic hardship or who work near or at the poverty line in order to serve a non-profit organization--not for those who make 6 figures and just think school is too expensive.  

[delco714]

I'm currently one of those who already put in 14 payments for forgiveness but a 10yr pay off plan. However somehow.. I'll be excused of like 8 months

[LT_Oneal_PAC]

A good amount of misinformation swirling. From the horse's mouth:

http://www.ibrinfo.org/faq.vp.html

Payment Calculator (click "Proceed"): https://studentloans.gov/myDirectLoan/mobile/repayment/repaymentEstimator.action

 

Greatest hits: 120 payments do NOT have to be consecutive; amount forgiven at the end IS considered taxable income even if you work for a non profit; the ENTIRE remaining loan balance (interest AND principle) is eligible for forgiveness as long as all criteria are met and loans are eligible (i.e. not consolidated with other certain types of loan; "full time" is ONLY considered to be 30 hrs per week if your employer does not define a company standard for such designation (extremely rare, in my experience)--meaning, if your employer sets full time contracts and corresponding benefits packages at 40 hours per week, you must work 40 hours per week to qualify (the exception being if you have multiple contracts working at more than one non profit).

 

And yes, as Sallie Mae reps have confirmed for me over the phone, at any given moment, in any given political climate, the government could change the way IBR works or take forgiveness away entirely--regardless of whether you've made one payment or 119...

Loan forgiveness under public service loan forgiveness is not taxable.

 

https://studentaid.ed.gov/sa/sites/default/files/public-service-loan-forgiveness-common-questions.pdf

[LT_Oneal_PAC]

People in pslf now will not receive the cap

 

According to a U.S. Department of Education spokesperson, current borrowers will not be subject to the proposed $57,500 cap on Public Service Loan Forgiveness. This cap will only apply to new borrowers after July 1, 2015 (if legislation mirrors the proposal). Current borrowers will only be subject to the $57,500 cap if they affirmatively opt into the new PAYE program. Borrowers repaying or applying for PAYE right now will not be subject to the cap.

 

http://educatedrisk.org/analysis/ed-further-clarifies-2015-budget-proposals-combined-incomes-pslf-caps-paye-terms

[Guest]

People in pslf now will not receive the cap

 

According to a U.S. Department of Education spokesperson, current borrowers will not be subject to the proposed $57,500 cap on Public Service Loan Forgiveness. This cap will only apply to new borrowers after July 1, 2015 (if legislation mirrors the proposal). Current borrowers will only be subject to the $57,500 cap if they affirmatively opt into the new PAYE program. Borrowers repaying or applying for PAYE right now will not be subject to the cap.

 

http://educatedrisk.org/analysis/ed-further-clarifies-2015-budget-proposals-combined-incomes-pslf-caps-paye-terms

So you are saying, if I apply for IBR in June 2015 then I will be able to get all my loans forgiven after 10 years. If I apply after July, I will have to go with PAYE to avoid the forgiveness cap?

 

I think I am even more confused about which option to take. 

I have $20K undergrad loans and $160K PA school loans total (with interest and all). Don't bite my head off please. I only made one bad decision: I went to a private PA school. Going there meant I had to pay for living expenses using my loan for 2.5 years. Some people from my class ended up being better off if they already lived in the city, had an SO to split rent/food with, or didn't have to go away for rotations. I probably could have decreased my figure by a little bit, but in the end it wouldn't have made much difference. 

 

My nonprofit hospital does pay me very well. I wouldn't say I am sacrificing anything by working there. My base income will increase as I start taking call after my training is over and I will hit the beginnings of a 6-figure salary. The problem is, I do not know how much on top of my base pay I will make. 

 

I was thinking that I can apply for IBR and do that for a year. That will cover interest for the year and prevent loan from growing. After a year I will know my approx salary and will be able to make a better decision how to pay off my loan. 

 

 

Another options is to consolidate. If I use DRB, and get a 2.9% interest rate,  my payments will go down to $1700 which is reasonable I suppose, compared to $2100. I will not be eligible for any forgiveness.

[LT_Oneal_PAC]

So you are saying, if I apply for IBR in June 2015 then I will be able to get all my loans forgiven after 10 years. If I apply after July, I will have to go with PAYE to avoid the forgiveness cap?

 

I think I am even more confused about which option to take.

I have $20K undergrad loans and $160K PA school loans total (with interest and all). Don't bite my head off please. I only made one bad decision: I went to a private PA school. Going there meant I had to pay for living expenses using my loan for 2.5 years. Some people from my class ended up being better off if they already lived in the city, had an SO to split rent/food with, or didn't have to go away for rotations. I probably could have decreased my figure by a little bit, but in the end it wouldn't have made much difference.

 

My nonprofit hospital does pay me very well. I wouldn't say I am sacrificing anything by working there. My base income will increase as I start taking call after my training is over and I will hit the beginnings of a 6-figure salary. The problem is, I do not know how much on top of my base pay I will make.

 

I was thinking that I can apply for IBR and do that for a year. That will cover interest for the year and prevent loan from growing. After a year I will know my approx salary and will be able to make a better decision how to pay off my loan.

 

 

Another options is to consolidate. If I use DRB, and get a 2.9% interest rate, my payments will go down to $1700 which is reasonable I suppose, compared to $2100. I will not be eligible for any forgiveness.

I'm saying all new borrowers after July 2015 may be subject to the cap. From what I understand that means you are eligible since you took your first loans out before that. I will admit I haven't investigated thoroughly on that note because it does not apply to me as I was finished before that date. Taking IBR vs PAYE does not matter. They are talks about changing the way PAYE is done and those who change from the old way to the new way will be subject to the cap no matter when they took loans.

 

Basically if you take loans after July 2015, I can't be sure what will happen.

[Guest]

Ah if you "take them out". Ok makes sense. I am not planning on taking any more out :D. Last loan was taken out Sept 2014. 

[loliz]

For those of you with these really high loans (150-160K), are these public loans or private? And does the loan forgiveness apply to private loans? Just curious...

[zoopeda]

For those of you with these really high loans (150-160K), are these public loans or private? And does the loan forgiveness apply to private loans? Just curious...

 

public only.  IBR forgiveness does not include private loans or public loans that have been consolidated with non-eligible loans. 

[Guest]

Mine are all federal. The forgiveness should apply, but now people are talking about the 50K cap and it makes me wonder what other surprise I would be in for if I choose to do it. 

[loliz]

https://studentloans.gov/myDirectLoan/mobile/repayment/repaymentEstimator.action

 

Interesting little calculator-

Could be helpful to figure out how much will be left at that ten year point when applying for PSLF..

[delco714]

I just called my loan sharks and going from inc cont to ibr cut my payment from 1150 to 680. BOOM. Embarrassing, but I forgot that I wanted to max payments while I was getting a boat load of loan repayment from my job. I'm stopping that in September so now I know how the wife and I will survive without it since combined our pa school loans right now are 2500$ a month :).

[cinntsp]

This is another helpful calculator for student loans or debt in general: http://unbury.us/

[Guest]

How about this idea:

Step 1. Unofficially, choose 25 year repayment option. This puts me at $1300 a month payment, which is doable.

Step 2. Officially, choose IBR which will require around $500 a month payment to start with.

Step 3. While on IBR plan, still pay $1300 a month. This way if something should happen to the PSLF program, at least I have been making progress at repaying my loans. If all goes well with the forgiveness program, I will get rid of my loan in 10 years (or get rid of $50K of it) by paying $1300 a month. If it doesn't go well, I keep paying $1300 a month. 

[cinntsp]

How about this idea:

Step 1. Unofficially, choose 25 year repayment option. This puts me at $1300 a month payment, which is doable.

Step 2. Officially, choose IBR which will require around $500 a month payment to start with.

Step 3. While on IBR plan, still pay $1300 a month. This way if something should happen to the PSLF program, at least I have been making progress at repaying my loans. If all goes well with the forgiveness program, I will get rid of my loan in 10 years (or get rid of $50K of it) by paying $1300 a month. If it doesn't go well, I keep paying $1300 a month. 

 

There is no point in paying more than the IBR minimum if you are going for PSLF. At the end of that 10 year period you would have paid an additional 96k unnecessarily. That seems like a poor decision.

[Guest]

There is no point in paying more than the IBR minimum if you are going for PSLF. At the end of that 10 year period you would have paid an additional 96k unnecessarily. That seems like a poor decision.

But, what happens if they cap it at $50 K or take it away entirely? Then I am left with a loan that has grown, not decreased :/

[zoopeda]

But, what happens if they cap it at $50 K or take it away entirely? Then I am left with a loan that has grown, not decreased :/

 

The good news is that so many of us are in such enormous student loan debt that we make up a powerful voting body.  If history is any guide, congress would give a couple years notice before making big changes to the policy (rather than pull the rug out from those who have already borrowed).  No guarantees, of course, but if you qualify for significant forgiveness, you might as well take advantage of it.  2 cents...

[cinntsp]

But, what happens if they cap it at $50 K or take it away entirely? Then I am left with a loan that has grown, not decreased :/

 

It's up to you whether you want to gamble away 96k on the less likely scenario.