REPAYE Questions for Married Physicians

[DrDebt]

Can someone please clarify the following?

We are two Drs, wife is attending making $180k with increase to $260k next year. I am in training making $71k with increase to $470k next year; all are pretax dollars. Two children. Filling taxes jointly. Total combined debt is $817k. Plan for REPAYE with PSLF

Questions: When applying for REPAYE and loan consolidation under studentloans.gov, it states “family size includes your spouse unless your spouse’s income is excluded from the calculation of your payment amount.” Does this mean I can count my family size as 3 and include my AGI only even if we file jointly? And could my wife do the same with her loans as well? Or are we forced to combine AGI and claim family of 4 on each of our applications?

Also, once PSLF is filled in 10yrs, is the remaining balance taxable?

 

Thank you in advance!

[DMFA]

PSLF forgiveness is not taxable.

You cannot exclude spousal income from your AGI to calculate your RePAYE payment. That is only for PAYE/IBR.

Your debts and incomes should be calculated together for your payment and then prorated between the two. For an AGI of $215k (assuming you're maxing pretax employer retirement accounts) and family of 4 ($24,600 poverty line), your combined RePAYE payment is (AGI-1.5pov)÷120 = (215,000 - 36,900) ÷ 120 = $1,517.50. If you both owe the same, each of your payments is $758.75. Do you get the math?

There are some serious calculations to be done here to make sure you're doing the right thing. If you're all-out PSLF - at darn near a million in the hole, I'd hope so - how many certified payments have you made, and how long do you have left? If you are just now applying for RePAYE, what has been done for all the years between graduating med school and now? If you consolidate a loan now, all your payments will be reset because it's a new loan. If you're committed to PSLF, the goal is to pay as little as possible over the life of the loan.

So, on $817,000 of debt, what was the initial principal upon entering repayment? That's how the 10-year standard payment, and thus the partial financial hardship (PFH), are calculated.

I'll assume $750,000; 10-yr standard for that assuming 6.8% interest is $8,631.02. At 6.8%, each month's accrued interest would be $4,250 - that's just interest, without even touching principal. PFH for PAYE, assuming family of 4, is an AGI of (8631.02 * 120) + 36,900 = $1,072,623, meaning if your AGI is less than that (I'm guessing probably so, right), you'd benefit from forgiveness...assuming it's still around in 10 years.

I can do further calculations, including total estimated paid over the life of the loan, if you can tell me your interest rate and how many PSLF-certified payments you've each made. I'm hoping you've got several years of them under your belt already...

[nachos31]

REPAYE is specifically designed to close the loophole you were hoping to exploit. You each have to count each others' income (no matter how you file taxes) and your family size is 4.

PSLF forgiven balances are not taxable.

Congrats on the huge bump in income. Give yourself a boost in lifestyle but save like a maniac!

[nachos31]

Haha, I started my post before DMFA but apparently didn't submit it. When I notice it open I submit only to then see DMFA's response. D'oh!

[DMFA]

nachos31 wrote:

Haha, I started my post before DMFA but apparently didn’t submit it. When I notice it open I submit only to then see DMFA’s response. D’oh!

Click to expand...

That's classic you, though :-P

[nachos31]

Hey...

That's fair.

[DrDebt]

Thank guys! I assumed the combination of our AGI needed to be included with a family of 4 (the website does state it confusingly like I have a choice).

Unfortunately, I will be starting payments from day 0. My wife has 2 years in IBR, but can consolidate all but 3 of those loans without reseting while entering REPAYE. After I consolidate, our interest rate is ~7.5%.

DMFA: When you say there are serious calculations to be done...it doesn't seem I have much more of a choice. I am excluded from PAYE as I can't claim financial hardship and REPAYE asks 10% of our AGI of roughly $694K next year which equates to the following on studentloan.gov over 120 months:

First Monthly Payment: $2,590; Last Monthly Payment: $4,064; Total Amount Paid: $393,462; Public Service Loan Forgiveness: $259,283

These are just my payments correct? Therefore, my wife can assume at least close to the same and making a combined monthly payment of approx $5k and a total amount paid of approx $800k!

Does this all seem right? Any and all advice is welcomed.

Thanks!