switching from REPAYE TO IBR and $0 payment during intern year

[Wardles888]

Hi all,

I was advised that I can start on REPAYE during my intern year as I am single and switch in a few years to IBR after I get married, to avoid having my future husband's salary accounted for in that 10% payment. Does anyone see any negatives with doing so?

Also, I was advised that as an intern you can pay $0 if you previously filed a tax return however on the application, it asks if your current salary reflects your previous tax return, which would not be true as I would be having a salary. What have others been doing about this?

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[SigmaFS]

The Repaye benefit of interest to you is the 50% interest subsidy on any interest accrual. For example, if you have $250k outstanding @ 7% with zero payments, your interest accrual is ~ $ 17.5k. The 50% REPAYE interest subsidy save you $8750 in one year.

With respect to reporting your income, report your income at the point you submit your REPAYE request. Report zero if haven't started started your residency.

If you're in grace period and can't submit the REPAYE request, consolidate your loans and waive your grace period.

 

[RangerBob]

The downside of switching from REPAYE to IBR is your interest will capitalize at that point. Depending on how much you owe, that could potentially cost you more in the long-run. I just switched from IBR to REPAYE and my interest capitalized, and it's a pretty sizeable sum. But the 50% interest subsidy more than makes up for that within a a year or two.

In addition, your loan forgiveness "clock" likely restarts. (PSLF doesn't, but the 25-year forgiveness likely does--I'm not 100% sure if this has been clarified by the government yet)

Unless you're really struggling, why not just stay in REPAYE? I hear a ton of people talking about the downside of REPAYE is it takes your spouse's salary into account but 10% is quite manageable and you would continue to benefit from the 50% interest subsidy. If your payment is high enough that it covers your accruing interest, then you're in good shape and may as well pay even more to get rid of your loans ASAP.

As far as the $0 payment goes, well the application asks if your current income is significantly different than your tax return. Some people just say no on the form to get the $0 payment; in addition, the loan servicer representatives are inconsistent and some will say you need to say yes, or that you can chose whatever you want. I decided to answer it truthfully since I felt 15% of my intern income was manageable and I also hope to benefit from PSLF if it sticks around (which I think is unlikely, but if it does stick around I'd be a fool not to pursue it based on my debt load).

As Sigma FS points out, if you apply for IBR prior to starting residency (and thus your income is still $0), then there's no ethical dilemma--you can say "no" and get your $0 payments. But usually you can't apply this early unless you're already exhausted your grace period or if you consolidate (which has some drawbacks)