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Income Based Repayment (IBR) good or bad idea?


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I will be graduating with about $200,000 debt. My "Standard 10yr payment" will be about $2500 a month! I have been looking into the Income Based Repayment plan and so far it seems like a good idea. You pay 15% of your income a month for 25yrs and after that time your debt is forgiven. Your monthly payment will increase if your income increases. (Of course, there are a few more contingencies.)

 

My question... Is anyone currently doing this? Is this a good idea?

 

 

Here are some of the links and FAQ I found on IBRs

 

http://studentaid.ed.gov/sites/default/files/income-based-repayment-common-questions.pdf

 

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

 

http://money.msn.com/debt-management/best-kept-secret-in-student-loans-credit.aspx

 

Help!

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I have less debt than you, but I'm still thinking about doing this. Before my class graduated, we had a company present to us about managing your debt. They do an interesting financial service for mostly med students and law students, but really any professional that has a big debt load, which includes us. The company of course charges you fee, but depending on how complicated you find the process and how much time you have on your hands, it could really be worth it. They handle everything for you and compare and contrast different options for you. You can get a free assessment from them (they did that for everyone in my class who was interested). http://www.gladvisor.com/

(I don't work for them or anything; I just think they are an interesting service worth looking into).

 

To me, IBR is a great solution for high debt. You can always give extra payments if you want to pay down your higher interest or "unsubsidized" debt more quickly, but as you pointed out, there is an incentive to pay the minimum because you eventually have the loans forgiven. And the great thing is, with IBR, Uncle Sam picks up the interest on your subsidized loans (for 3 years), which is a huge savings right there (likely over $1K per year for you). That way you can direct your payment to loans that are accruing interest. ALSO, if you work for a government agency or non-profit, you don't have to wait 25 years, your loans are forgiven in just 10 with the Public Interest Option!! That would be a huge savings. You'd be surprised what qualifies as a non-profit. It isn't just clinics geared toward uninsured folks (where I actually plan to work). The biggest fancy "private" hospital in my area, which employs tons of PAs is actually a non-profit and would qualify! I would have never guessed!

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I think that to be able to give truly good advice we would need to know more about your situation. What field are you working in/what is your expected salary like? If you're in a specialty that pays well, the IBR may be less attractive than paying the most you can to pay the loans off ASAP so that interest doesn't compound as long. Do you have other big expenses like family/kids/house payment that would stop you from paying the loans off quickly? How old are you?

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I have less debt than you, but I'm still thinking about doing this. Before my class graduated, we had a company present to us about managing your debt. They do an interesting financial service for mostly med students and law students, but really any professional that has a big debt load, which includes us. The company of course charges you fee, but depending on how complicated you find the process and how much time you have on your hands, it could really be worth it. They handle everything for you and compare and contrast different options for you. You can get a free assessment from them (they did that for everyone in my class who was interested). http://www.gladvisor.com/

(I don't work for them or anything; I just think they are an interesting service worth looking into).

 

To me, IBR is a great solution for high debt. You can always give extra payments if you want to pay down your higher interest or "unsubsidized" debt more quickly, but as you pointed out, there is an incentive to pay the minimum because you eventually have the loans forgiven. And the great thing is, with IBR, Uncle Sam picks up the interest on your subsidized loans (for 3 years), which is a huge savings right there (likely over $1K per year for you). That way you can direct your payment to loans that are accruing interest. ALSO, if you work for a government agency or non-profit, you don't have to wait 25 years, your loans are forgiven in just 10 with the Public Interest Option!! That would be a huge savings. You'd be surprised what qualifies as a non-profit. It isn't just clinics geared toward uninsured folks (where I actually plan to work). The biggest fancy "private" hospital in my area, which employs tons of PAs is actually a non-profit and would qualify! I would have never guessed!

 

 

Thank you so very much for the information! I never realized how many non-profit hospitals there were. I will look into the link you posted.

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I think that to be able to give truly good advice we would need to know more about your situation. What field are you working in/what is your expected salary like? If you're in a specialty that pays well, the IBR may be less attractive than paying the most you can to pay the loans off ASAP so that interest doesn't compound as long. Do you have other big expenses like family/kids/house payment that would stop you from paying the loans off quickly? How old are you?

 

I will be graduating in a few months and will start working a few months after that. I am open to all specialties and plan on applying for all fields. I understand this is a difficult question to answer since I do not know what I will be making as a new grad. You make a good point because if I do get a well paying job then maybe just doing the standard 10yr plan is the way to go. I am 28, single, no kids, no other real big expenses.

 

Thank you for replying.

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income based is a good deal and has not been used by enough people

 

SERIOUSLY look at getting a job with loan repayment...... in a few years you could have most of it gone!

 

 

Ventana offers good advice. I'm looking into a position with loan repayment. Use the NHSC website (http://nhsc.hrsa.gov/loanrepayment/index.html) to see clinics in your area that qualify and also the details of applying (this year's cycle has not opened yet). If they have a position, apply. Even if they don't have a position, send your resume. You never know. What you want to look at is HPSA number (health service provider shortage area) for that clinic and/or area. 14 and above gives you the best shot at getting the money (sometimes they run out for lower number apps) and you also get $30K/year. below that you get $20K/year. You have to make a 2 year commitment and can renew after that to pay off all your loans. You can also look into Indian Health Services and state loan repayment (my state only offers $10K a year to PAs, whereas NHSC gives the same amount of money to MDs and PAs and NPs)

 

YOU can do IBR AND loan repayment. I'm going to try to do both (and I'll have IBR if loan repayment doesn't come through). That means you pay as little of your own money as possible (since you reduce your repayments upfront), while also dumping the money you get in from NHSC every year.

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