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  • #1

    Question about IBR monthly payment capped at 10-year standard repayment

    I'm about 5 years into IBR payments and hoping for PSLF with an attending job in academia.  I recently came to learn that the IBR monthly payment will cap at whatever the 10-year standard payment would have been.  This is very nice since my high salary would have put me at a ~$5,000 monthly payment, while the 10-year standard at the time I started repayment was ~$3,300.

    My wife and I have filed our taxes under the "married, but filing separately" category in order to reduce my IBR payment during residency.

    Now as an attending, my IBR monthly payments will hit the 10-year standard cap with my salary alone.

    If this is the case, am I right that I might as well just file married?  As "married, but separate filers", I've been unable to deduct student loan interest and it will have significant implications in deducting mortgage interest moving forward.

    If my salary is high and IBR will cap my payment, shouldn't I just file married and send the FedLoan people a joint tax return?  Any advice would be great.
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  • #2
    Once your calculated monthly payment is higher than the 10-yr standard plan would have been when you enter repayment (i.e. no financial hardship), there's no benefit to filing separately in that regard (and probably isn't at all).

    However, once your income is over $160,000 (MFJ), you can't deduct student loan interest anyway...and even if you could, you can only deduct $2,500.

    Comment

    • #3
      ...you should still submit your income verification, though. It helps to be on IBR to keep your PSLF eligibility, even if your payment is maxed out.

      Comment

      • #4
        +1. Time to consider married filing jointly

        Comment

        • #5

          pslfhopeful wrote:



          I’m about 5 years into IBR payments and hoping for PSLF with an attending job in academia.  I recently came to learn that the IBR monthly payment will cap at whatever the 10-year standard payment would have been.  This is very nice since my high salary would have put me at a ~$5,000 monthly payment, while the 10-year standard at the time I started repayment was ~$3,300.

          My wife and I have filed our taxes under the “married, but filing separately” category in order to reduce my IBR payment during residency.

          Now as an attending, my IBR monthly payments will hit the 10-year standard cap with my salary alone.

          If this is the case, am I right that I might as well just file married?  As “married, but separate filers”, I’ve been unable to deduct student loan interest and it will have significant implications in deducting mortgage interest moving forward.

          If my salary is high and IBR will cap my payment, shouldn’t I just file married and send the FedLoan people a joint tax return?  Any advice would be great.
          Click to expand...


          This is a riskier strategy but I would consider amending the past 3 years of your taxes to married filing jointly. You'd probably get a sizable return from doing so. Additionally, there's a low likelihood that the loan servicer would ask you to make higher payments either now or in the future on what has already happened. Some folks have mentioned they're worried about some kind of an audit of your tax returns and payments once forgiveness finally starts happening. That's a possibility but one that I think has a low probability. It's definitely a risk but if you'd be talking about getting like $50,000 back then it's a risk work taking in my opinion.

          It's why I almost never suggest to folks that married filing separately is actually a good idea

          Comment

          • #6

            Travis @ Student Loan Planner wrote:



            pslfhopeful wrote:



            I’m about 5 years into IBR payments and hoping for PSLF with an attending job in academia.  I recently came to learn that the IBR monthly payment will cap at whatever the 10-year standard payment would have been.  This is very nice since my high salary would have put me at a ~$5,000 monthly payment, while the 10-year standard at the time I started repayment was ~$3,300.

            My wife and I have filed our taxes under the “married, but filing separately” category in order to reduce my IBR payment during residency.

            Now as an attending, my IBR monthly payments will hit the 10-year standard cap with my salary alone.

            If this is the case, am I right that I might as well just file married?  As “married, but separate filers”, I’ve been unable to deduct student loan interest and it will have significant implications in deducting mortgage interest moving forward.

            If my salary is high and IBR will cap my payment, shouldn’t I just file married and send the FedLoan people a joint tax return?  Any advice would be great.
            Click to expand…


            This is a riskier strategy but I would consider amending the past 3 years of your taxes to married filing jointly. You’d probably get a sizable return from doing so. Additionally, there’s a low likelihood that the loan servicer would ask you to make higher payments either now or in the future on what has already happened. Some folks have mentioned they’re worried about some kind of an audit of your tax returns and payments once forgiveness finally starts happening. That’s a possibility but one that I think has a low probability. It’s definitely a risk but if you’d be talking about getting like $50,000 back then it’s a risk work taking in my opinion.

            It’s why I almost never suggest to folks that married filing separately is actually a good idea
            Click to expand...


            ...so what you're saying is, you could have your cake and eat it too?  File separately to get lower payments on a loan that's going to be forgiven anyway, then go back and amend your taxes to MFJ to get your tax money back?

            Comment

            • #7

              DMFA wrote:



              Travis @ Student Loan Planner wrote:



              pslfhopeful wrote:



              I’m about 5 years into IBR payments and hoping for PSLF with an attending job in academia.  I recently came to learn that the IBR monthly payment will cap at whatever the 10-year standard payment would have been.  This is very nice since my high salary would have put me at a ~$5,000 monthly payment, while the 10-year standard at the time I started repayment was ~$3,300.

              My wife and I have filed our taxes under the “married, but filing separately” category in order to reduce my IBR payment during residency.

              Now as an attending, my IBR monthly payments will hit the 10-year standard cap with my salary alone.

              If this is the case, am I right that I might as well just file married?  As “married, but separate filers”, I’ve been unable to deduct student loan interest and it will have significant implications in deducting mortgage interest moving forward.

              If my salary is high and IBR will cap my payment, shouldn’t I just file married and send the FedLoan people a joint tax return?  Any advice would be great.
              Click to expand…


              This is a riskier strategy but I would consider amending the past 3 years of your taxes to married filing jointly. You’d probably get a sizable return from doing so. Additionally, there’s a low likelihood that the loan servicer would ask you to make higher payments either now or in the future on what has already happened. Some folks have mentioned they’re worried about some kind of an audit of your tax returns and payments once forgiveness finally starts happening. That’s a possibility but one that I think has a low probability. It’s definitely a risk but if you’d be talking about getting like $50,000 back then it’s a risk work taking in my opinion.

              It’s why I almost never suggest to folks that married filing separately is actually a good idea
              Click to expand…


              …so what you’re saying is, you could have your cake and eat it too?  File separately to get lower payments on a loan that’s going to be forgiven anyway, then go back and amend your taxes to MFJ to get your tax money back?
              Click to expand...


              Disclaimer: I'm not a tax advisor. We've not seen this work out positively or negatively. What I'm saying is that technically it's completely legal to amend your taxes. The loan servicer would then need to contact you to change your payments. Given that they frequently tell my clients totally wrong information, I have a high degree of confidence that they would not be able to do so which means you could save the money on the tax amending. I would NOT do this as a proactive strategy merely as a reactive strategy for folks who wish that there debt was lower.

              After all the money spent on taxes is gone forever whereas money put into loans even if you saved a little filing separately reduces uncertainty with the PSLF program

              Comment

              • #8

                Travis @ Student Loan Planner wrote:



                Disclaimer: I’m not a tax advisor. We’ve not seen this work out positively or negatively. What I’m saying is that technically it’s completely legal to amend your taxes. The loan servicer would then need to contact you to change your payments. Given that they frequently tell my clients totally wrong information, I have a high degree of confidence that they would not be able to do so which means you could save the money on the tax amending. I would NOT do this as a proactive strategy merely as a reactive strategy for folks who wish that there debt was lower.

                After all the money spent on taxes is gone forever whereas money put into loans even if you saved a little filing separately reduces uncertainty with the PSLF program
                Click to expand...


                Agree on that.  They're complete rubbish in almost all instances I've tried to talk to them.  I don't know how such cluelessness can be tolerated...oh wait, I do, because I'm a government employee too, and I'm surrounded by them.

                Comment

                • #9

                  DMFA wrote:



                  Agree on that.  They’re complete rubbish in almost all instances I’ve tried to talk to them.  I don’t know how such cluelessness can be tolerated…oh wait, I do, because I’m a government employee too, and I’m surrounded by them.
                  Click to expand...


                  One time I asked a client to send in a request to Navient's customer service email to ask what repayment program they were on. Navient replied that they were on REPAYE, which would mean that they were supposed to be getting an interest subsidy. I looked at their interest charges and didn't think there was a way the math added up. I decided to conference call them and ask, and they said again the client was on REPAYE. I asked them why no interest subsidy was showing up, and asked them to double check their statement.

                  Couple minutes later, "oh so sorry they're actually on PAYE"

                  I couldn't believe that. Imagine if they were working in a doctor's office and gave out an incorrect diagnosis to a patient. They can't get it right even on the most basic of functions. I guess that's why I have a job

                  Comment

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