[Editor's Note: This is a guest post from “Dr. Wise Money“, a PGY2 who has guest posted here before about how she paid off her student loans as a PGY1. She is a resident on the fast track to financial independence, recently purchasing her second home and maxing out retirement accounts anticipating financial independence sometime in 2023. She has spent a great deal of time and effort delving into the details of the new REPAYE program and here presents several case studies to help those trying to decide whether or not to use it.We have no financial relationship. ]
Revised Pay as You Earn (REPAYE) is the new kid on the block of government income driven repayment plans. In this article, I summarize the principles and then review eight different case studies illustrating them.
3 Main Differences Between REPAYE and its Friends, IBR and PAYE.
- If your monthly payment doesn’t cover the interest that accrued, the government pays
- 100% of the difference on subsidized loans for first 3 yrs, then 50% of the difference thereafter
- 50% of the difference on unsubsidized loans indefinitely
- You pay payments equal to 10% of your household discretionary income (counts your spousal income no matter how you file taxes)
- No payment cap (especially important after residency completion as it can erase potential PSLF)
Questions
When deciding about REPAYE, you need to know the answers to the following questions.
- What is my TRUE REPAYE interest rate after the subsidy?
- What are my interest rate/term offers for refinancing?
- Do I plan on pursuing PSLF?
- Do I plan on pursuing (taxable) forgiveness through IBR, PAYE, or REPAYE after 20-25 years of payments?
- Am I married to a spouse making a similar income or more?
REPAYE Case Studies
First we'll look at six “flow chart” case studies, and then consider two reader case scenarios with step by step evaluation of REPAYE. Assumptions for the flow chart case studies are as follows:
- Class of 2016
- 200K total federal student loans
- 6.1% weighted interest
- Monthly accrued interest: $1017
- REPAYE mo. payment requirement calculated with repayment estimator @ https://studentloans.gov/myDirectLoan/mobile/repayment/repaymentEstimator.action#view-repayment-plans
- Flow chart case studies include the following:
- Single with med school & moonlighting income
- Single without med school or moonlighting income
- Married, household of 5, with some spousal income
- Married, household of 2, with some spousal income
- Married, household of 5, with high spousal income
- Married residents, household of 2, with some moonlighting income
Case Study #1 and #2 The Single Docs
In Case Study 1 (Left) a single PGY1 with med school income (25k) & moonlighting income (35k). His PGY1 REPAYE payments are based on his 2015 tax return which had 25k AGI; his PGY3 REPAYE is based on his 2017 tax return which has 100k income. With increasing AGI from tax returns 2015 to 2017, his REPAYE payment and effective REPAYE interest rate both increased.
In Case Study 2 (Right) a single PGY1 had no income in medical school but did do some moonlighting in residency. His PGY1 REPAYE payments are based on his 2015 tax return which had $0 AGI; his PGY3 REPAYE is based on his 2017 tax return which shows 100k income. His REPAYE payments and effective interest rate were lower than in Case Study 1, but also increased over time as his income increased. His initial effective interest rate is exactly half of his weighted interest rate.
[Editor's Note: It took me a while to figure out that EIA is somehow an abbreviation for Effective Annual Interest Rate.]
Case Studies #3, 4, and 5 Married With Children
In Case Study 3, we have a married PGY1 with spousal income since medical school (30k) & moonlighting income (15k). His PGY1 REPAYE is based on his 2015 tax return which had 30k AGI; his PGY3 REPAYE is based on his 2017 tax return which has 110k income. With increasing AGI from tax returns 2015 to 2017, his REPAYE payment and effective REPAYE interest rate both increased.
In Case Study 4 (middle), we see what happens with fewer family members and somewhat higher income. This is a married PGY1 with spousal income since medical school (50k) & moonlighting income (15k). His PGY1 REPAYE is based on his 2015 tax return which had 50k AGI; his PGY3 REPAYE is based on his 2017 tax return which has 130k income. With increasing AGI from tax returns 2015 to 2017, his REPAYE payment and effective REPAYE interest rate both increased. Note how much higher his initial payment and effective interest rate is than the doc in Case Study 3.
Case Study 5 (right) demonstrates what happens when you're married to a high income professional. This married PGY1 has had a high spousal income since medical school (150k) & moonlighting income (15k). His PGY1 REPAYE is based on his 2015 tax return which had 150k AGI; his PGY3 REPAYE is based on his 2017 tax return which has 230k income. Note how by the end of residency his REPAYE payment exceeds his monthly accrued interest, and his effective interest rate is 6.1% (he receives $0 of interest subsidy.)
Case Study #6 Married Residents
In case study six, we have two docs, a married PGY1-PGY1 couple with $0 medical school income & a little moonlighting income in residency (15k each). Their PGY1 REPAYE payment is based on their 2015 tax return which had $0 AGI; their PGY3 REPAYE is based on his 2017 tax return which has 130k income. Note the jump in effective interest rate as they start moonlighting.
Case Study # 7 Married To an Attending and In IBR
“I have 150k student loan principle, 50k interest, all at 7%. My spouse makes 200k as an attending. We are a family of 6. I make 60k as a PGY3/6. Should I switch to REPAYE?”
First, calculate your monthly REPAYE payment. Is it affordable? Using this calculator, you can see that your REPAYE monthly payment is $1,759/month.
You currently have 200k total debt (all consolidated): 150k principle, 50k interest. Your current IBR monthly interest is calculated on the 150k principle. But when you leave IBR to go REPAYE, your 50k interest will capitalize, and your new principle will be 200k.
Your REPAYE monthly interest is calculated on the new 200k principle:
200k*7%= 14k annual interest without subsidy. Divide that by 12 to get your monthly interest of $1167. Since your monthly payment is greater than the monthly interest you accrue, REPAYE will NOT subsidize you. This means, your interest rate is still 7%. So you should not switch to REPAYE since it ONLY works against you by capitalizing your current interest without any interest reduction.
If you stick with IBR, your current interest won’t capitalize until you no longer qualify for IBR or when you leave IBR voluntarily.
Another option to consider is refinancing. If you refinance, you will likely get a 7 year 4.5-5% interest rate with one time capitalization when the loan company buys your loan from the feds. This will give you 200k*4.5% = 9k in annual interest v.s. your current 150k*7% = 10.5k interest. Not a whole lot of savings, but you may also benefit from a lower $0-100 payment. Obviously refinancing ensures you will not receive PSLF.
[Editor's Note: Some docs in this situation, especially if going for PSLF, may wish to file their taxes Married Filing Separately and use either the PAYE (if you qualify) or IBR programs.]
Case Study # 8 Married to a Spouse With No Income and In IBR
“I have 150k student loan principle, 50k interest at 7%. My spouse stays at home. We are a family of 5. I make 60k as a PGY2/6. Should I switch to REPAYE?”
Per the calculator, your REPAYE monthly payment is $145/month. This means you will enjoy some interest savings by going on to REPAYE. To switch from REPAYE to IBR, there's one middle step. They will put you on Standard 10 year repayment where you need to make at least 1 payment before you can select REPAYE. If the standard 10 year payment is too high, you can apply to make a reduced payment. Another factor to consider is that when you leave IBR (with the goal of going to REPAYE), your interest will capitalize.
You currently have 200k total debt (all consolidated): 150k principle, 50k interest. Your current IBR monthly interest is calculated on the 150k principle. But when you leave IBR to go REPAYE, your 50k interest will capitalize, and your new principle will be 200k.
Your REPAYE monthly interest is calculated on the new 200k principle, so 200k*7%= 14k annually or $1,167 monthly not counting the REPAYE subsidy. Subtract your monthly payment from your monthly interest = $1167 -$145 = $1022. REPAYE will pay 50% of $1022 = $ 511. Your net annual interest after subsidy will be 12 x ($1167 monthly interest -$ 511 monthly subsidy) = $7872
Thus, your effective interest rate will be 7,872/200,000= 3.94%. Your total interest saved will be $6,132/year on annual simple interest; (Technically there will be a little more savings since the feds calculate interest daily, not annually.)
You could also compare this to refinancing during residency. Let's say you can refinance into a 7 year loan with a 4.5% rate [Fat chance. Residents are doing well to refinance into 6% loans lately, but not when this post was submitted to me.-ed] Obviously 4.5% is more than 3.94%, so you'll end up paying more in interest if you refinance, about $45 more each month. That may change as you progress through residency, however, so if you're not going for PSLF, you may wish to recalculate your effective interest rate each year and compare to what you can refinance to.
Two Caveats
Remember that consolidating your loans will RESET your PSLF 120 payment clock. If you have already consolidated your loans or all your loans are PSLF eligible (don’t need consolidation), you don't need to worry about this.
Also remember that while under current law you can switch from REPAYE back to IBR upon residency graduation, (to avoid the potentially higher payments under REPAYE since those payments aren't capped like IBR and PAYE payments are) but that law could change.
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Student Loan Refinancing Disclosures
Summary
Compared to IBR or PAYE, REPAYE helps those with little household income and a large debt because the interest subsidy only exists on the gap between your accrued interest and your payment. The more you pay, the smaller the gap between your monthly payment and the monthly accrued interest, so the less interest subsidy you get. When you pay exactly your interest accrued monthly or above, you get no subsidy at all.
What do you think? Have you switched from IBR or PAYE to REPAYE? Why or why not? Comment below!
Thanks for the great article. Can you explain more about when loans capitalize? I thought they capitalized after your grace period following graduation, but that appears not to be the case. I’ve been putting extra $ toward higher interest rate fed loans but haven’t gotten through the accrued interest. If the loans won’t capitalize during residency, I’ll put money toward the loans with the smallest dollar amount of interest instead to avoid interest on the principal.
great question, there are a few triggers for interest capitalization.
1. as you stated correctly, after your grace period following graduation
2. anytime you voluntarily switches out of a fed repayment plan (ex. when you refinance fed loans with a private bank, or when you leave IBR to go to REPAYE)
WCI, please confirm. that’s what I remember from myr reading.
I apologize if i’m mistaken. this old brain is not working that great since I’m not dealing with student loans on a personal basis…
don’t know what happened to my response.
i think the trigger for interest capitalization includes
1. any time you leave IBR for something else (either refinance with private banks, or to go to REPAYE, or got automatically switch to 10 year repayment plan when your income is so high that your IBR is actually higher than standard 10 year repayment plan)
2. after your grace period when you graduated from medical school
please add to my response and correct me if i got anything wrong, thank you!
Wow, you have looked at this in great detail!
I’m an attending 1 year out of training. I’m 5 years into IBR and going for PSLF. My income is about 350K. I called yesterday and talked with customer service at Fed Loan Servicing and they made it sound like a no-brainer to switch from IBR to REPAYE. I didn’t realize the interest would capitalize making the switch. Maybe I should call back and continue with IBR.
it’s hard to say without knowing your numbers
for instance, my assumption is that since you are an attending, you likely don’t have interest that is accruing each money above your payment, in other words, i think your payment should be decreasing your principle each month and that there should be no interest left to be capitalized…
WCI, do you know if interests get capitalized the moment you hit attending hood?
i think there is a trigger for interest capitalization when transitioning from PGY to attending status (the higher income switches people from IDR to 10 year standard, and “leaving” though not voluntarily IDR in this case triggers the interest capitalization)
Interest capitalizes whenever you switch to standard or whenever you lose your “partial financial hardship” regardless of which IDR plan you’re in (IBR, PAYE, REPAYE).
Given most people update their servicers in the fall with a tax return, for many people this will take place the year AFTER you become an attending. Of course, the servicers request that you update your accounts whenever your income changes, which if you did as requested would happen whenever you did it (not as though most people update their income info every July to account for their increased PGY salary).
Keep in mind that you don’t automatically lose your partial financial hardship with an attending salary. It depends on both how much you owe and how much you make.
Ben, I was under the impression that for REPAYE that the partial financial hardship does not apply, so interest will never capitalize while you are in REPAYE (unless you switch out to another plan)
I believe the interest would capitalize if you leave IBR and go to REPAYE. If you’re looking to run the numbers, you might find this calculator helpful: https://doceden.com/calculators/pslf-planner/
REPAYE without submitting income verification turns into a 10 year standard repayment rate. I know this because this is what I’m doing.
If FedLoans turns around and tells me that REPAYE sans income verification is not a PSLF-eligible payment method then I’ll refinance my loans in a jiffy, but for now I’m operating under the assumption that payments made this way are PSLF eligible. If this is true, it removes REPAYE’s drawback, namely the lack of a payment cap.
Interesting trick. You are the first that I’ve heard of doing this. Please keep us up to date on your experience. It might be best not to ask too many questions!
I believe you are allowed to leave REPAYE and switch to a 10 year standard repayment plan at anytime, but my understanding is the 10 year standard rate would now be based on your loan balance when you left REPAYE (and at this time any accrued interest would capitalize and become part of your loan balance). Do you know if that’s what happened when you didn’t submit income verification? Appreciate you sharing this!
Nice post filled with several different incomes and lifestyle choices.
REPAYE is the new kid on the block and works well for many people. Like you summarized about the potential drawbacks of the plan. REPAYE payments can be higher than 10 year standard repayment plan if you make a large amount of income and your spouses income plays a role no matter if you file jointly or separately. This means that this plan works very well for those with large debt and relatively lower income compared to other sub specialized physicians. It’s not the plan for everyone but will work well for many physicians.
totally agree. REPAYE is awesome for those with lower income and without significant spousal income.
Is there any way to verify that my interest subsidy is actually being applied without having to do the math on my own? My servicer (nelnet) makes no notation of any subsidy.
i am not sure.
but to check yourself, you take your principle multiple by your annual rate/365*days in the month to get your accrued interest.
if you total debt amount is not getting as large as the accrued interest + previous month total debt- your payment this month, you are getting some subsidy.
if you want to make sure you are getting the right amount of subsidy.
you can subtract your REPAYE required monthly payment from the interest accrued, multiply it by 50%= the amount of subsidy you should receive
your current loan amount = interest accrued – your payment – the subsidy
Fedloan does not display an interest subsidy, but I know that some other providers do. If you call and ask, they’ll tell you how much the subsidy is.
There is a mistake above that I also only recently discovered. Only switching from IBR to REPAYE requires being punted into the standard or reduced payment for a month. Switching back to IBR to REPAYE doesn’t do this, nor does that transition month apply to switching in/out from PAYE. It’s unique to switching out of IBR.
What a weird little twist.
that’s interesting, thank you for pointing that out. i highly encourage all of you who are in the trenches of actually dealing with the process to educate one another. i read as much as i can about these loans but i am slightly detached as i have not ever been on IDR or PSLF myself. thanks again!
If you decide to pay more than 10% of your income, do you still get the full subsidy or only the difference between your monthly payment and interest accrued? This would change our payment plan dramatically.
great question. the subsidy is 50% on the gap between the accrued interest and your payment monthly.
so the greater your payment, the lower your subsidy, the higher your effective post-subsidy interest rate.
so REPAYE in general really only benefits people who have high debt/income ratio and are struggling with negative amortization (ballooning) of their student loans.
for instance, a PGY3 with $2000/mo in accrued interest, but REPAYE payment is $400/mo (driven by a typical PGY income… w/o significant spousal or moonlighting income), the monthly gap is $1600, subsidy is $800.
the more the PGY makes, the higher his/her payment, the smaller the gap, the smaller the subsidy, the higher the effective interest rate.
the way i see it is
if I want to be aggressive with paying off my loans myself (ie, pay more than the interest and into the principle) each month, than REPAYE is no good for me because there’s non interest subsidy at all.
i would refinance to a lower rate than fed rates and just throw every penny at my debt
if i choose to invest over paying my debt down aggressively (waiting to see if I may sign up for PSFL-eligible job upon finishing training) i would go for REPAYE and pay the bare minimum to student loans (to maximize subsidy)
hope this helps.
Thanks for the reply! We are PGY 1 and applied with DRB, but the rate they give to residents now is around 6%, so refinance is out of window for now. Our loan is around $200K, interest rate at average of 6.1%. Our 10% payment would be around $160 base on our last year’s income and the interest accured monthly would be around $1000. We are DINKS and can probably afford to pay $1000 a month towards the debt, but wouldn’t it be better for us to just pay the $160 in minimum, so we get the $450 subsidy in interest? Any other better options for our sitaution?
Yes, REPAYE’s effective interest rate is often lower than what you can get refinancing as a resident. Remember you can just refinance your private loans or just do the ones over 6% if you want.
Keep in mind accrued interest does not capitalize while in REPAYE. Another option is to pay the minimum while in REPAYE, as you described, and save the $840 ($1,000 – $160) in an interest bearing account – Ally Bank. When you’re in position to accelerate payment, use what you saved as a lump sum payment.
I’ve been informed by others but have not confirmed that you can make *extra* payments on a monthly basis and still keep the same subsidy, because it’s calculated on what your actual scheduled REPAYE payment is, the monthly interest accrued, and is applied monthly. As in, interest accrues, you pay, subsidy applied, *you pay more*, then clock resets, ad infinitum. If so, you can enjoy the benefits of REPAYE while also being as responsible as possible.
But I’d definitely confirm that with your servicer before doing it.
Oh, awesome! That’s great to know and a great method that wouldn’t ever come to my mind. Thanks!
Would I still receive the interest subsidy if i make extra payments every few months or so? For example, if I pay the minimum 10% for 3 months then month 4 I pay an extra $10,000. I understand I would not receive the interest subsidy for month 4. Would month 5 still receive the interest subsidy if i pay the minimum?
The subsidy is applied monthly, so yes that should work. I’ve heard from a couple of people that their servicer claimed that was fine, and one of them specifically said in that scenario they could get the subsidy every month (see my comment above; I’ve been meaning to call to confirm as well). I would call your servicer and ask specifically about this before doing anything (and let us know!)
If you have more than one loan and pay more than the minimum on one, you will “lose” the subsidy on the loan you are paying down. However, the subsidies for your other loans will be in tact. I paid down a chunk of my loans for piece of mind and essentially “because I could” (growing emergency fund and savings plan in place). I’m not sure if it was the most mathematically sound thing to do regarding effective interest rates but it sure did make me feel better!! My loans: http://i.imgur.com/UvyElHL.jpg
this sounds like a great idea.
definitely check with your servicer
subsidy applied monthly.
you save money on the side and destroy the debt by lump sum and only sacrifice subsidy for the month.
another way to take advantage of REPAYE is
1. do the absolute minimum (ie get the absolute maximum on interest subsidy, abs lowest effective interest rate.)
2. direct the remaining cash flow all towards Roth investment (which there should be 23.5k available to you as a PGY with only W2 income.) if you have moonlighting income that’s significant and comes in 1099, you can even LLC yourself and stow away even more money in your retirement accounts in index funds (bearing annualized return of 8%. assuming your effective REPAYE interest rate is decent around 4-5%, then you are potentially making extra 3-4% by leveraging student debt and investing instead.)
i was more conservative and my debt was 6.8%, so i paid it off before investing.
but if your debt is cheaper (lower interest rate because of REPAYE) definitely consider maxing out retirement funds.
here’s how i leverage my credit card debt (negative to 0% interest) to max my retirement last year as PGY2.
http://www.hcplive.com/physicians-money-digest/contributor/dr-wise-money/2016/06/cash-is-king-credit-is-queen
you can easily apply the same idea to pay off your student loans even faster.
I realize this is an old conversation at this point, but for any others that may have ventured this far in the comments and been wondering if this is true, here is a link to an updated post written in 2019 regarding if it’s possible to pay extra towards your loan and still get the subsidy (Spoiler Alert: you cannot): https://www.whitecoatinvestor.com/repaye-interest-subsidy/
Dr Wise Money & WCI,
This is a great article and I have a related question. I’ve searched for this answer high and low so I’m hoping you can help me.
Do Graduate Plus quality for the 50% subsidy on unpaid under REPAYE? As I read your article and the specific regulation, it only mentions subsidized or unsubsizded loans but does not reference Graduate Plus loans specifically.
I’ve called 2 federal loan service companies and they both said yes, however, they tend to be unsure of their answers. I’ve also called the federal student loan support center and they had no idea what I was talking about. Any guidance you have would be appreciated. Thanks!
Yes, Federal Direct Graduate PLUS loans are REPAYE eligible. Here’s a link for reference:
https://studentaid.ed.gov/sa/repay-loans/understand/plans/income-driven#eligible-loans
i second Sigmafs.
i believe all loans with DIRECT in their names are eligible for REPAYE subsidy, and eligible for PSLF too if paid during W2 employment at non profit organizations.
Thank you both for your replies.
I have seen the chart that Sigmafs posted, however, I originally questioned it because it simply says “What types of loans can I repay under an IDR plan.” Since it didn’t specifically reference the 50% subsidy, I wasn’t convinced.
Dr Wise Money – Your response makes sense. I didn’t notice it before, but the Grad Plus loans are labeled as Direct Grad Plus on the loan service website. The problem with the student aid website is that there is so little information regarding the program, especially in regards to this part. Thanks again.
no problem. happy to be of assistance anyway i can 🙂 medicine is not a easy road, we don’t have to be lonely on this hard journey!
This is probably a naive question but what is the concern with interest capitalization? In my conversations with FedLoanServicing, they tell me that monthly payment amounts are based on the principal and interest so they aren’t any different once the interest is capitalized. I know it can affect credit ratings since the total loan increases.
Hi Jake, you are partially correct. Generally speaking, your student loan interest will capitalize under a specific set of conditions:
1. When the loan enters repayment.
2. When a deferment ends.
3. When forbearance ends.
4. When the loan defaults (ack!)
5. A change in repayment plan.
6. Loan consolidation.
As far as FedLoanServicing is concerned, they should only be calculating your monthly interest based off of your principal and not principal+interest like you said. See https://myfedloan.org/billing-payment/about-interest/
I’m still trying to decide if switching from IBR to REPAYE is the best option. I’m getting inconsistent answers when I call FedLoanServicing. Dr Wise Money, can I pay you to run my numbers?
You can hire a professional to assist you. I don’t think DWM takes money for advice, just like I don’t due to lack of licensure.
https://www.whitecoatinvestor.com/student-loan-advice/
Can you recommend a professional who understands all the PSLF details?
https://www.whitecoatinvestor.com/student-loan-advice/
Thanks!!!
One other thing to consider for those doing a fellowship and either a) moving to a city where your fellowship income will be lower than your residency income or b) losing the extra moonlighting income that you can earn in your last year of residency but won’t be able to earn in your first year of fellowship. You can always have your monthly payment recalculated based on your new fellowship income rather than continue to make payments based on your (higher) income from your final year of residency. I am in a position to add $50-75k of income by moonlighting during my final year of residency. I won’t be able to moonlight at all during my first year of fellowship and thus won’t be able to make loan payments based on my prior year’s AGI.
Great article. Just recently switched from PAYE to RePAYE for the interest subsidy. Anybody know how to check if the interest subsidy is actually being applied each month? Would it show up on the monthly statement from the loan servicer?
Hello,
I will be starting residency shortly with about $440,000 worth of loans (including interest). PAYE calculated my monthly payments as $289 per month, however I have been having a difficult time incorporating that in my budget, given that I will be training in a city with a high cost of living. Is there a way to reduce the calculated PAYE base pay?
Yes. You can defer the loans, but I think it is a terrible idea. With that sort of debt burden, an early career in academia or working for some other 501(c)3 so you will be eligible for PSLF is a very good idea, and if you don’t make payments during residency, those years won’t count. Figure out a way to make the payments even if it means getting all your food from the hospital nutrition rooms. Also, be sure you don’t want to do REPAYE (you probably do).
There are lots of docs with families living on a resident salary (not to mention over half of Americans) just fine even in high cost of living areas. Live like they do and you should have no problem making your payments. Heck, even if you have to borrow those payments on a credit card…make the payments so you will have 3-5 years of PSLF qualifying payments upon finishing your training. In fact, enroll now and start making payments even before finishing med school.
Great article and thank you for the everyones comments, very helpful! I recently made the change from IBR to REPAYE.
I am a new attending and am going for PSLF ($250 in federal loans average 7%) and refinanced those that were not eligible for PSLF ($90K with Laurel Road at 3.25%). I have some extra cash on a monthly basis, would it be better to put the extra towards starting a ‘side fund’ in case PSLF collapses or pay down my private loans quicker and then start my ‘side fund’? Other option is to stop contributing to my Roth IRA and use that to create my ‘side fun’?
I’d pay down the private loans personally but it wouldn’t be wrong to invest it hoping to beat 3.25%. I don’t think I’d stop Roth IRA contributions to create a side fund.
I am not in the medical field, however, I have accumulated $200k in school loans and currently make $85k. My wife is in school and works a few gigs here and there (makes a couple thousand/yr).
Which payment option would best fit my needs with a mid-income/high debt ratio? I am thinking REPAYE, thoughts?
What’s your plan? Are you going for PSLF? REPAYE forgiveness? Were they graduate loans or undergraduate loans? Too much missing information to give good advice. You might consider hiring someone to advise you on this:
https://www.whitecoatinvestor.com/student-loan-advice/
UNSUBSIZED – 10 LOANS TOATALING $160K
SUBSIZED – 5 LOANS TOTALING $24K
GRAD PLUS – 3 LOANS TOTALING $40K
TOTAL APPROXIMATION: $224K
I would love to pay everything off, however, I know there is no way I can afford the generic payments they offer and see the income payment options with forgiveness as my only option. I tried a financial advisor, however, his advise was to put thousands each month to the loans and pay them off (which I do not have) quick as possible.
What’s your income? Why don’t you have thousands a month to put toward them? If you borrowed $224K to get a job, I expect that job has a pretty good income, no?
$85k, and hopes to obtain a high paying job. Taking care of wife and 2 kids( including day care).
Physical therapist? I’m trying to put the debt and the income together.
That’s a nasty DTI ratio, especially at that income. You don’t have the option to “live like a resident” and make huge loan payments. PSLF might be a great gig for you if you can find a job at a 501(c)3.
I am not in the medical field, however, some of the learnings on this site applies to things I can try to do.
I’m a resident in a high paying specialty in the northeast with $330,000 in loans. I have 3.5 more years to go in training, which includes fellowship. After training I expect to start around $250,000. Currently my salary is $60,000. Right now I am utilizing REPAYE.
I recently got married a few months ago and my wife makes around $120,000.
I think it likely (though not definite) that I do NOT get a job in academics, but want to continue to pay the minimum while in training to keep the option of PSLF open should I ultimately pursue an academic career.
Now my question is does it make sense to switch from REPAYE to PAYE so that her income would not be included in my monthly payments? My understanding is that if I stay in REPAYE my monthly payment would be based off our combined $180k salary, however if I switched to PAYE it would be based solely on my $60K salary. I understand the drawback of PAYE is that I would be that I would no longer get any interest subsidized by the government, although I think Our combined income would potentially put me above the level where I would receive any substantial subsidy through REPAYE.
Thanks for your help.
It probably depends on whether you’re willing to file MFS. i.e. it’ll cost you more in taxes but could increase potential amount forgiven. Your situation is complicated enough you should hire professional help from one of these folks:
https://www.whitecoatinvestor.com/student-loan-advice/
The good news is it is pretty cheap compared to regular financial advice.
Does it make sense to go into REPAYE during residency if you dont intend to make minimum payments but rather pay as much as you can on resident salary?
Girlfriend (maybe wife by then?) will be starting residency at the same time, she has no loans. No plans to do PSLF obviously.
Just compare your effective rate under REPAYE (be sure to figure out if your extra payments are decreasing your subsidy or not with your particular loan company) to the rate you can refinance to and take the lower one.
Does it make sense to go into REPAYE during residency if you dont intend to make minimum payments but rather pay as much as you can on resident salary?
Girlfriend (maybe wife by then?) will be starting residency at the same time, she has no loans. No plans to do PSLF obviously.
If you get married, that affects things. If you are sure you won’t go for PSLF, then it’s all about comparing the rate you can refinance to as a resident against your effective rate under REPAYE. Take the lower one. Obviously refinance any private loans ASAP.
I think you’re asking whether your extra payments wipe out the REPAYE subsidy. Great question answered here:
https://www.whitecoatinvestor.com/repaye-interest-subsidy/
Be sure to read the comments.
Thanks for all the great info and for what you do.
Currently started first year of residency. Not looking to qualify for PSLF. About 250K of Direct Loans. Just got married last month. Wife is currently making about $55K. I made a grand total of $19K last year doing some part time work for my dad’s company. I have read all the info on REPAYE. Figured since I made very little last year, and my wife and I plan on filing taxes this year as single (so her income is not included), that REPAYE could work. The idea is to then aggressively pay them off when I get out and take your advice to live like a resident. I read this article https://www.whitecoatinvestor.com/how-to-enroll-in-repaye-early/ and it seemed like a great idea! I want to take advantage of the low payments I will get for this year. They are asking for my wife to cosign the consolidation request. I want to make sure this is not like cosigning a private loan.
A) Is my thought process correct on my strategy
B) Is my wife on the hook if she cosigns the Fed Loan Consolidation paperwork?
Thanks!
MFS doesn’t do any good under REPAYE, only under IBR and PAYE. I bet the right move for you is probably filing MFJ. You don’t need to get your payments as low as possible. Sure, it would be nice to maximize the REPAYE subsidy, but the tax benefit of MFJ would probably outweigh that I bet. You’d have to run the numbers to know for sure.
I wouldn’t cosign and I wouldn’t consolidate if it required cosigning. Consolidation has very little upside.
Hello, thanks for all your advice and great posts!
I am transiting from fellow salary with moonlighting ($150,000) to attending salary ($450,000). I am in Repaye, plan to do PSLF. I have $325,00 in student debt. I am about 4.5 years into PSLF.
My husband is in his second year of EM residency, has $200,000 student debt. We plan to just pay off his student debt since he probably won’t work for a non-profit.
I am wondering if I should try to switch to IDR? I’m worried how much my monthly payments will be, especially when my husband will be an attending. When I put the salary into calculators, it says I don’t qualify for Repaye with that high of salary. Also-my understanding is that there is no cap on Repaye? I saw the post about defaulting to the 10 year plan payments, if that still qualifies for PSLF? Any advice? And yes there is a part of my that wants to ditch the PSLF plan and just pay it! especially if my monthly payments will be so high.
Thanks so much!
What payment plan are you in? IBR? PAYE? REPAYE?
Repaye
REPAYE is an IDR plan. If you mean IBR, then you just have to run the numbers to see if payments are lower. PAYE is the usual route, but might be too late for you to switch to either. If you’re stuck in REPAYE, might even be worth just refinancing and paying them off if your required payments are so big they’ll mostly have it paid off before you get forgiveness. If you need help running the numbers, consider getting a consult from Andrew at:
https://studentloanadvice.com/