Residency Income Change and PAYE?

[Accurate219]

Hi,
I was wondering, if we have transferred residencies or advanced from a PGY1 to a PGY2, do we need to update Navient or our servicer regarding increase in salary from PGY1 to PGY2? or is this something they will figure out on their own when you submit tax returns next yr?

Thanks

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[SigmaFS]

Another question to ask is why are you not in REPAYE? But, in response to your question, they'll capture the increase when you submit next year's return.

 

[Accurate219]

Another question to ask is why are you not in REPAYE? But, in response to your question, they'll capture the increase when you submit next year's return.

I don't see the advantage of REPAYE, I'm really bad with this stuff but from what I understand I am doing my graduate loans over 25 years? Is that so?

Thanks

 

[Accurate219]

I don't see the advantage of REPAYE, I'm really bad with this stuff but from what I understand I am doing my graduate loans over 25 years? Is that so?

Thanks

Any guidance on the benefits of REPAYE would be helpful. I only have graduate student loans and was thinking that the 20 year plan (with PAYE) would be better than 25 year plan. Is there any real hidden benefit? I am really horrible with finances as this is something my ex used to handle for me. Thanks

 

[sazerac]

You can google "paye vs repaye" and get good answers, but here are the high points:

REPAYE gives taxable forgiveness (if necessary) in 25 years vs 20.
REPAYE has no hard maximum payment. If you make a million dollars one glorious year, you will have some hefty student loan payments that year under REPAYE.
REPAYE payments are only 10% of discretionary income, not 15%.
REPAYE takes into account spousal income, even if you file separately.

The AAMC FIRST website has an accurate student loan calculator that lets you play around with the kinds of scenarios medical professionals are likely to encounter.

 

[SigmaFS]

Sazerac's points are correct, but misses on critical REPAYE benefit - 50% interest subsidy on any interest accrual. This REPAYE 50% interest subsidy is significant while in residency. When you're an attending, you can switch to PAYE, accelerate payment with the federal repayment options or refi with a private lender (Sofi, First Republic, DRB). Here's a YouTube video I developed discussing the federal income driven repayment programs for medical students/residents (Sound is not great, I'll edit soon):

 

[Student Loan Planner]

There are real reasons you might chose PAYE over REPAYE. Say your spouse was an attending and you were a resident. Your spouse makes $250,000 a year and you make $50,000 a year as a resident. Filing separately for taxes would cost you $10,000.

In this scenario, you could chose PAYE, file separately, and pay $216 a month. Your payment under REPAYE would be $2300. Hence, you'd pay about $24,000 extra towards your loans versus losing $10,000 in taxes. If you filed separately, your net savings assuming you were going for the PSLF program would be $14,000 a year. Over four years of residency those could be substantial savings.

It's also important to note that you might be able to amend your taxes to married filing jointly for the prior three years in the future if it's advantageous to do so. So there are some reasons you would chose PAYE over REPAYE going into residency. However, most folks especially those with similar debt and income profiles would be best served by REPAYE.