Although I would add that if $920/month out of a gross income of $10,000/month is considered to be insanely high, then I would scrutinize your cash flow and spending patterns quite thoroughly. Every reduction of monthly payment now is more money that you’re going to have to pay back later.
RePAYE:
- Payment = (AGI – poverty level for fam size) / 120 [2/3 of IBR]
- 50% of unpaid interest each month is subsidized
- Interest does not capitalize while in the plan (but it still accrues, you just don’t pay interest on interest)
- Spousal income is always counted in AGI
- No monthly payment cap
PAYE:
- Payment = the lesser of 10-yr std at time of entering plan or (AGI – poverty level for fam size) / 120 [2/3 of IBR]
- Interest does not capitalize until you no longer have a partial financial hardship (if calc’d payment > 10-yr std)
- Interest capitalizion is maxed at 10% of intial principal (e.g. if prin was $150,000, its max at capitalization is $165,000)
- Can exclude spousal income by filing taxes separately
- Monthly payment capped at 10-yr standard
You have prin $90,000 and int 6.68%, meaning you would accrue at most $501/month in interest, and slightly less thereafter since you will be slowly eating away at principal. If your IBR payment is $920 with joint income, then your PAYE and RePAYE payments should be $613 with that same income. Since that is greater than the monthly accruing interest, none those interest-related aspects seem to apply to you.
RePAYE is usually the better way to go, especially if filing separately isn’t right for you, but you won’t get its biggest benefits (50% interest subsidy and no capitalization while in plan), and the payment isn’t capped at 10-yr standard like PAYE is. At this point, they’re very similar to you, unless you have a significant income drop – in which case the RePAYE interest subsidy would benefit you.
However, in the next few years once you are stuck paying a higher monthly payment approaching the 10-yr standard with either RePAYE or PAYE, you should be able to afford a private refi at that point which will save you more money over the life of the loan given the horrific 6.68% interest rate that they stuck us with. Criminal, really…
I still think, however, that at that income level and monthly payment, there should be other areas in which you could optimize your monthly spending so as to lessen the impact of the loan payments. If you haven’t already, I’d go back 3 months and scrutinize every transaction in and out of your account to see where all your money’s going. Some banks’ online interfaces can mostly do this themselves. You might be surprised – we sure were when my wife and I did it. That’s the first step in becoming not broke – stopping the bleeding.
RePAYE:
- Payment = (AGI – poverty level for fam size) / 120 [2/3 of IBR]
- 50% of unpaid interest each month is subsidized
- Interest does not capitalize while in the plan (but it still accrues, you just don’t pay interest on interest)
- Spousal income is always counted in AGI
- No monthly payment cap
PAYE:
- Payment = the lesser of 10-yr std at time of entering plan or (AGI – poverty level for fam size) / 120 [2/3 of IBR]
- Interest does not capitalize until you no longer have a partial financial hardship (if calc’d payment > 10-yr std)
- Interest capitalizion is maxed at 10% of intial principal (e.g. if prin was $150,000, its max at capitalization is $165,000)
- Can exclude spousal income by filing taxes separately
- Monthly payment capped at 10-yr standard
You have prin $90,000 and int 6.68%, meaning you would accrue at most $501/month in interest, and slightly less thereafter since you will be slowly eating away at principal. If your IBR payment is $920 with joint income, then your PAYE and RePAYE payments should be $613 with that same income. Since that is greater than the monthly accruing interest, none those interest-related aspects seem to apply to you.
RePAYE is usually the better way to go, especially if filing separately isn’t right for you, but you won’t get its biggest benefits (50% interest subsidy and no capitalization while in plan), and the payment isn’t capped at 10-yr standard like PAYE is. At this point, they’re very similar to you, unless you have a significant income drop – in which case the RePAYE interest subsidy would benefit you.
However, in the next few years once you are stuck paying a higher monthly payment approaching the 10-yr standard with either RePAYE or PAYE, you should be able to afford a private refi at that point which will save you more money over the life of the loan given the horrific 6.68% interest rate that they stuck us with. Criminal, really…
I still think, however, that at that income level and monthly payment, there should be other areas in which you could optimize your monthly spending so as to lessen the impact of the loan payments. If you haven’t already, I’d go back 3 months and scrutinize every transaction in and out of your account to see where all your money’s going. Some banks’ online interfaces can mostly do this themselves. You might be surprised – we sure were when my wife and I did it. That’s the first step in becoming not broke – stopping the bleeding.
Thanks for the info.
How did you calculate the $613 monthly payment under RePAYE? With RePAYE the monthly payments will remain the same (reapply each year) and then what happens after 15 years?
What about those refi marketplaces like Credible.com? Is it considered a private loan?
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