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When PAYE = IBR, which to choose?

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  • When PAYE = IBR, which to choose?

    New post on this forum (though not new a new reader of the website).

    I have what seems a weird question. I'm on the Navient website with the repayment estimator and the repayment details (first and last monthly payments, the total amount paid, and repayment period of 240 months) are the SAME for PAYE and IBR (for new borrowers).

    If this is the case... which repayment plan should I choose?

    Background: pediatrician (2 years out of fellowship, but working as a gen peds), $240K at 4.5% of government loans ($44K direct subsidized), a gross salary of $180K in Texas, with 3 kids and a very busy stay-at-home wife. I think I've made like 10 total payments to my loans. Also, my loans were in deferment for 6 months because I had switched to a job which offered loan repayment, but I'll be back into a group practice. The only thing I'll miss from that job is the matched 401K.

  • #2
    Any thoughts?

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    • #3
      It's unlikely you're eligible for IBR for new borrowers as a new borrower is defined as someone borrowing a federal loan for the 1st time on or after July 1, 2014. Your choice could be either PAYE or REPAYE.  Given you the information you provided (4.5% interest rate seem unusually low), then I suggest PAYE.  Your estimated PAYE payment ~ $1,196/month.

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      • #4
        Can you confirm you actually qualify for new borrower IBR?  I agree with @sergio that it it's unlikely that you qualify for IBR as a new borrower given what you wrote.  Also do you qualify for PAYE?  It requires you to have no loan disbursements prior to 10/1/2007.

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        • #5
          I'll call Navient and let you all know. The Navient repayment "calculator" apparently gives the options based on the 'qualifying loans' on my account, and since it links to my loan history (which has the actual dates) I took it at face value. Reality may be a bit different.

          About the low rate of 4.5% - I know that around 2005-2006, something happened and the federal government issued the lowest rates for student loans. I remember this being a big deal as the dean of students had to obtain some clarification from financial services, and a bunch of us changed our loans from like 6-7% to 4.5%. Some got 3%, which was a historic low (at least according to my school).

          I don't think it's likely to get a lower interest rate.

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          • #6
            Okay, if you had federal loans issued in 2005-2006, then the choice is IBR or REPAYE.  Not eligible for PAYE for reasons stated by FPMD.  Then, I would suggest REAYE.  Monthly payment is same as PAYE (~$1196/month), but REPAYE is 25 years if you have graduate loans. Keep in mind only Federal Direct Loans are eligible for REPAYE.  You can verify loan type at www.nslds.ed.gov.

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            • #7
              I agree with the above. I think the best option is PAYE (or REPAYE if you don't qualify for PAYE). The payments are usually cheaper, and that will especially help if you are going for the PSLF as well.

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