Loan repayment: 15% rule apply to moonlighting? spouse?

[Poitiers2]

Now that we can no longer get loan deferment in residency and have to make payments of:

[Residency salary - 150% of poverty level] * 15%

I was wondering whether this salary data included a spouse's income. For instance, if my spouse earns $90k, will I be forced to pay:

[$90k-15.6k] *.15 = $11,160 per year = $930 per month

Or just the standard $365 per month or so you pay if you're making 45k.

The other question is whether moonlighting salary factors into this. If I'm making 35k per year moonlighting, am I going to end up paying

[85k-15.6k]*.15 = $867 per month?

Man, it would be nice if this interest was paid off while we're in residency... I'm guessing I'll end up paying the moonlighting part, at least.

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[yadayadadude]

At my exit interview the other day, the presenter specifically said that IBR payments will be based on household income if you're married filing jointly. So I'd guess that your spouse's income and your moonlighting income will be be part of the equation.

 

[nontrdgsbuiucmd]

I'm not familiar with the term IBR, but for a federal consolidated loan through the direct loan servicing center, there are a few repayment options; fixed, graduated, or income dependant. The 3rd option requires payment of 15% of household income (they're looking for total household income), and according to a person there a few days ago, both spouses must sign in order to accept this option.

Not sure how this would work if one got married after starting the loan repayment option?

The .. inconsistency .. (and reason I'd look carefully into this option) is that in my case, spouse has grad degrees with consolidated loans too. The way that this option would work with 2 separate consolidated loans? you guessed it.. each one would require roughly payment of 15% of household income.

I tried to argue the logic of this with them -- even a garnishment cannot take more than 25% of income, and that would be 25% of income left after paying taxes; why would I agree to pay 30% of gross for the combined total of 2 consolidated loans? My guess is this glitch will eventually be worked out; probably it is not totally unusual for Doctors to marry Laywers.. or PhD librarians or others with advanced degrees. In the meantime, I'm going with the graduated loan option.

 

[dragonfly99]

I'm not familiar with the term IBR, but for a federal consolidated loan through the direct loan servicing center, there are a few repayment options; fixed, graduated, or income dependant. The 3rd option requires payment of 15% of household income (they're looking for total household income), and according to a person there a few days ago, both spouses must sign in order to accept this option.

........
I tried to argue the logic of this with them -- even a garnishment cannot take more than 25% of income, and that would be 25% of income left after paying taxes; why would I agree to pay 30% of gross for the combined total of 2 consolidated loans? My guess is this glitch will eventually be worked out; probably it is not totally unusual for Doctors to marry Laywers.. or PhD librarians or others with advanced degrees. In the meantime, I'm going with the graduated loan option.

This IS messed up. I guess they can rightly argue though, that if a single person living alone has to pay 15% of the income, then why should two married people not pay 30% of their total income?

 

[NTF]

The new IBR rules state that if you want the 15% rule to apply to just your salary, you can file taxes as married but filing separately.

This rule was instituted because married couples who both had student loans were getting reamed because they both had to pay 15% of their combined incomes, essentially having to pay twice as much as others. Now married couples can file separately and only pay 15% of each of their respective salaries.

 

[gstrub]

F that! Married filing separately makes you ineligible for breaks like student loan interest deductions and educational credits, right? There's another few thousand I'd be out.

 

[John Deere Gree]

If you are that worried about paying loans in residency, put your loans in forbearance and try to pay some of the interest.

 

[Ginnybeen]

If you are that worried about paying loans in residency, put your loans in forbearance and try to pay some of the interest.

I think that's the problem - you can't do this anymore, you get your three years and after that you HAVE to go into repayment. The 15% rule (income based repayment) is their way of making the new policy (repayment after three years) more bearable -too bad based on what I am reading here it still sucks, and it is still going to be a huge burden on most residents.

 

[nontrdgsbuiucmd]

F that! Married filing separately makes you ineligible for breaks like student loan interest deductions and educational credits, right? There's another few thousand I'd be out.

student loan interest deduction phases out fast, something silly like you can only deduct up to 2-3K of student loan interest, and then only if you make less than 110K family income (rough numbers) but basically as a "average" physician, you will not get any benefit from this deduction so married filing separately wouldn't change this.

To DF -- my disagreement on the 30% rule is that if two single people have grad loans and are each paying 15% of their respective 100K salaries, combined total student loans paid would be 15% of 200K or 30K for both. But if they had the same income and were married, they'd pay 30% of 200K or 60K in loan payment per year..another marriage penalty I guess..

thanks NTFogie, will have to look into that IBR option I think..sounds like a good plan given my household situation!

 

[gstrub]

student loan interest deduction phases out fast, something silly like you can only deduct up to 2-3K of student loan interest, and then only if you make less than 110K family income (rough numbers) but basically as a "average" physician, you will not get any benefit from this deduction so married filing separately wouldn't change this.

To DF -- my disagreement on the 30% rule is that if two single people have grad loans and are each paying 15% of their respective 100K salaries, combined total student loans paid would be 15% of 200K or 30K for both. But if they had the same income and were married, they'd pay 30% of 200K or 60K in loan payment per year..another marriage penalty I guess..

thanks NTFogie, will have to look into that IBR option I think..sounds like a good plan given my household situation!

Can we get confirmation on this latter bit? My FA admin said it shouldn't make a difference.

And BTW, during the 1st 3 years of residency, that educational credit (for the 1st year) and 2-3 years of deducting the $2500 interest paid will have a significant positive impact on lifestyle.

 

[Poitiers2]

F that! Married filing separately makes you ineligible for breaks like student loan interest deductions and educational credits, right? There's another few thousand I'd be out.

Do we know if this is true?

 

[Sol Rosenberg]

.

 

[thebeatgoeson]

From the financial aid exit talk I attended today given by Paul Garrand this is what I know.
Regarding IBR: Remember it's up to 15%, but most likely at 15%. Excessive debt or low income could bring that percentage down.

If you are married and file together each person (that had student loans to service) would pay 15% of their adjusted gross income that is 150% over the poverty level.
If you are married and file separately, then the 15% rate is factored based upon YOUR income.
So, if you are in residency and the spouse is employed full time. File separately. That will lower your the required payments. If that's what you what.

Right now, the law dictates that the loan companies look at your tax records to find your adjusted gross income. So, moonlighting would factor in there.
According to the speaker, they are working on changing the law to prevent the above-mentioned 'marriage penalty' by allowing you to submit sources as a proof of income (your W2).

And to ginnybean, you can still put your loans into forebearance during residency. However, residents no longer qualify for the economic hardship deference. You're not required to make payments, but the interest is capitalizing.
I'm not sure what three year break there is or used to be. But I know my current federal loans (and my private loan) have a grace period of 6 months after I graduate.

edit: please correct me if I'm wrong. This is what I gleaned from a fast (but great) presentation

 

[sumstorm]

I also think the other way to bring the double 15% household down is to consolidate jointly (but this is risky because it makes the spouses responsible and liable for each others student loan debt, I believe, even if one is permenantly disabled or deceased.)

 

[Sol Rosenberg]

I also think the other way to bring the double 15% household down is to consolidate jointly (but this is risky because it makes the spouses responsible and liable for each others student loan debt, I believe, even if one is permenantly disabled or deceased.)

Yup, that is probably a bad idea.

 

[nontrdgsbuiucmd]

I also think the other way to bring the double 15% household down is to consolidate jointly (but this is risky because it makes the spouses responsible and liable for each others student loan debt, I believe, even if one is permenantly disabled or deceased.)

I have a joint consolidation now, and was told that it is no longer possible to obtain one. Which is likely good -- apparently both persons are fully liable for the whole amount under the joint consolidation; per the direct loan people, this "joint consolidation" idea was great for lenders but put substantially more risk on the borrowers.

Apparently the rule is that BOTH borrowers must qualify for things like the in school deferment, so if I'm in school and spouse is earning a small amount, technically we cannot qualify for a deferment but rather would need to request a hardship forebearance or unemployment forebearance and have interest accrue during this period, although 1/2 of the joint consolidation loans are mine and I would qualify (had we not jointly consolidated) for a deferment with no interest accruing on the subsidized federal loans during the deferment period.

Buyer beware, the rules change frequently, what looks good now may look bad in a few years....

GSTRUB re: getting confirmation -- I was told by the direct loan servicing center that for each of our consolidated loans, that of my spouse & our joint consolidation, all income would be considered & we'd need to pay 15% of income toward (each) loan. There's fine print in the borrower's bill of rights stating that exceptions can be made in extraordinary circumstances, the only entity that I can find capable of making these exceptions is called the "ombudsman" fyi