Income-based repayment and tax filing

[red_jellyfish]

I am graduating this coming May and I'm planning on applying for an income-based repayment for my federal loans (probably going with REPAYE or PAYE). I understand that they calculate monthly payments based on your tax return (adjusted gross income). I was told to file a tax return this year, even though I didn't make any money (therefore, AGI is $0), so my payments will be low to none for the first year. I tried applying through an E-file software (Turbotax), but they won't let me e-file due to entering a $0 AGI, but I can still mail in my form. I'm just wondering if anyone has any advice on how to navigate this process or can let me know what you're experience is. How would they calculate monthly payments if you DIDN'T file a tax return? I'm assuming then you would not be able to apply for REPAYE or PAYE without a current tax return on file? It's my first time filing taxes for myself, so I'm honestly kind of overwhelmed, especially when trying to plan for my future student loan payments. Thanks everyone!

---

Members don't see this ad.

 

[JaynaAli]

They can use either your previous year's taxes OR a pay stub from your job to calculate your repayment. Taxes are easier, and would provide the added benefit of showing 0 income for your first year. Technically you have to certify that your income isn't 'significantly' different from that on your taxes if you use that, but that is part of why the VIN people advocate for people consolidating their loans (into one big government loan, NOT consolidating with a private lender) the minute after you can after graduation but before you actually begin your job. That lets you waive your 6 month grace period (aka get done paying 6 months sooner) and you aren't technically lying that your income is the same ($0) as your taxes showed. If you were to submit a pay stub the income they will calculate based upon your pay would be presumably higher and you would likely have a payment required.

I can't help on how to file taxes with $0 AGI...I always had at least a little bit of income from part time jobs.

 

[red_jellyfish]

They can use either your previous year's taxes OR a pay stub from your job to calculate your repayment. Taxes are easier, and would provide the added benefit of showing 0 income for your first year. Technically you have to certify that your income isn't 'significantly' different from that on your taxes if you use that, but that is part of why the VIN people advocate for people consolidating their loans (into one big government loan, NOT consolidating with a private lender) the minute after you can after graduation but before you actually begin your job. That lets you waive your 6 month grace period (aka get done paying 6 months sooner) and you aren't technically lying that your income is the same ($0) as your taxes showed. If you were to submit a pay stub the income they will calculate based upon your pay would be presumably higher and you would likely have a payment required.

I can't help on how to file taxes with $0 AGI...I always had at least a little bit of income from part time jobs.

Awesome, thanks for the info!

 

[yogapony]

Yes, you absolutely should file a tax return even with no income (not sure of the logistics on that either, but even if you have to mail it in, do that). My financial advisor also recommended consolidating immediately - I did that and my payments went into effect the summer after graduation, although my monthly payment was zero dollars during intern year.

 

[red_jellyfish]

Yes, you absolutely should file a tax return even with no income (not sure of the logistics on that either, but even if you have to mail it in, do that). My financial advisor also recommended consolidating immediately - I did that and my payments went into effect the summer after graduation, although my monthly payment was zero dollars during intern year.

Good to know! Just to make sure, consolidation means combining all loans under one loan company, therefore you just make one monthly payment correct? All my federal loans are under nelnet, I'm not sure if they just automatically consolidate, but it's definitely something I will look into. Thanks!

 

[DVMDream]

Be very careful with loan consolidation. Everyone talks about it and says do it and do it immediately, but I have heard of many getting trapped in something they didn't want/understand because they just consolidated and didn't really read into it.

1. If you are going to consolidate you need to make sure the consolidated loan will still qualify for income-based repayment options. Not all loans do. So you have to be very careful, the last thing you want is to only get stuck with conventional payment options when you had in your head that you were going to need income-based repayment all along.

2. If you want any type of income-based repayment you HAVE to consolidate with a federal loan company. You can't go with a private provider, they don't offer these repayment options, nor do they offer any of the protections of the federal loans. Federal loans are fairly easy to get into forbearance, deferment, etc should you happen to find yourself ever needing these options. Some private loan companies aren't as friendly when it comes to requesting these. For example, with the pandemic federal loans have been put on a 6 month payment freeze and 0% interest rate for 6 months. This isn't happening for private loans, only for federal loans.

3. If you ever think there is a chance you might end up employed by somewhere in which PSLF would apply, you have to be SUPER careful in that the consolidated loan will be one that is covered under PSLF. If it isn't, you will miss out on this option.

4. Consolidation gives you one giant loan. That is it. You then no longer have the option to jump on and decide you have extra money to pay down a particular loan. So right now say you have 6 loans, you can jump on and pay the minimum on each and then decide that you have extra money and you are going to try to pay down a particular loan. Say one of those loans is $10k and you can easily cover interest on that one and start touching the principle, so you pay the minimum on all and put an extra $300 on that one loan. You lose the option to do something like this with consolidation. You have one giant loan, with one set interest rate and trust me, it is much harder to reach the interest amount of 5% on a $350k loan than it is to reach the interest of say 6% but the loan is only $10k. Makes it super difficult to pay extra and actually be able to even touch the principle. With a bunch of smaller loans, there is that chance you can pay extra on a single loan and actually be paying on the principle some.

 

[Cephal0pod]

Tony Bartels from VIN is going to be doing a Zoom seminar thing for this year's graduating class sometime within the next month which will go over all of the important stuff mentioned by the lovely people above and how to make it happen. If you haven't joined VIN already (fo free as a student), highly recommend you do that so you'll get the emails about this seminar and other helpful stuff related to loan repayment. I know Tony's stuff has been a lifesaver for me, I feel a lot more comfortable with my plans for repayment thanks to him. There is also a forum on there in the student section dedicated specifically to questions related to loans - I've seen a fair number of students posting questions about their specific situations in there and Tony has responded pretty quickly.

From what I have been hearing and learning, I agree that it would likely make your life easier if you just go ahead and file a tax return, whether that requires you mailing it in or trying another free e-file software (I've done HR Block in the past).

 

[red_jellyfish]

Be very careful with loan consolidation. Everyone talks about it and says do it and do it immediately, but I have heard of many getting trapped in something they didn't want/understand because they just consolidated and didn't really read into it.

1. If you are going to consolidate you need to make sure the consolidated loan will still qualify for income-based repayment options. Not all loans do. So you have to be very careful, the last thing you want is to only get stuck with conventional payment options when you had in your head that you were going to need income-based repayment all along.

2. If you want any type of income-based repayment you HAVE to consolidate with a federal loan company. You can't go with a private provider, they don't offer these repayment options, nor do they offer any of the protections of the federal loans. Federal loans are fairly easy to get into forbearance, deferment, etc should you happen to find yourself ever needing these options. Some private loan companies aren't as friendly when it comes to requesting these. For example, with the pandemic federal loans have been put on a 6 month payment freeze and 0% interest rate for 6 months. This isn't happening for private loans, only for federal loans.

3. If you ever think there is a chance you might end up employed by somewhere in which PSLF would apply, you have to be SUPER careful in that the consolidated loan will be one that is covered under PSLF. If it isn't, you will miss out on this option.

4. Consolidation gives you one giant loan. That is it. You then no longer have the option to jump on and decide you have extra money to pay down a particular loan. So right now say you have 6 loans, you can jump on and pay the minimum on each and then decide that you have extra money and you are going to try to pay down a particular loan. Say one of those loans is $10k and you can easily cover interest on that one and start touching the principle, so you pay the minimum on all and put an extra $300 on that one loan. You lose the option to do something like this with consolidation. You have one giant loan, with one set interest rate and trust me, it is much harder to reach the interest amount of 5% on a $350k loan than it is to reach the interest of say 6% but the loan is only $10k. Makes it super difficult to pay extra and actually be able to even touch the principle. With a bunch of smaller loans, there is that chance you can pay extra on a single loan and actually be paying on the principle some.

Thanks for the info! I'll definitely keep it all in mind. Much appreciated!!

 

[red_jellyfish]

Tony Bartels from VIN is going to be doing a Zoom seminar thing for this year's graduating class sometime within the next month which will go over all of the important stuff mentioned by the lovely people above and how to make it happen. If you haven't joined VIN already (fo free as a student), highly recommend you do that so you'll get the emails about this seminar and other helpful stuff related to loan repayment. I know Tony's stuff has been a lifesaver for me, I feel a lot more comfortable with my plans for repayment thanks to him. There is also a forum on there in the student section dedicated specifically to questions related to loans - I've seen a fair number of students posting questions about their specific situations in there and Tony has responded pretty quickly.

From what I have been hearing and learning, I agree that it would likely make your life easier if you just go ahead and file a tax return, whether that requires you mailing it in or trying another free e-file software (I've done HR Block in the past).

I have a current student membership right now. I'll make sure to check in out. Thanks so much!

 

[yogapony]

The best thing you can do for yourself is get professional advice from someone who understands student loans and can look at your individual situation. I came up with a repayment plan with a financial advisor who works with vets, and consolidation (federal) and income based repayment was my best option. I'm 2 years out, just bought a house with no issues, and have a manageable plan.