New attending - no longer qualify for IBR

[daman42886]

I apologize if this has been answered elsewhere, but I just can't find a clear answer.

I am a new attending and just finished a 5 year residency. I started repaying my loan under the IBR program near the beginning of residency. At that time, the balance was $180,000. Now the balance is about $210,000 with all the accrued interest. I am planning on going the PSLF route so I have not refinanced yet.

Once I recertify for IBR this coming year, I assume I will not qualify for IBR payments given my new attending salary. So, if I understand it correctly, in order to remain eligible for PSLF I can remain in IBR but my payments will be capped at the 10 year standard repayment amounts.

My question is how do they calculate these standard repayment amounts? Is it based off the $180,000 balance that I owed when I first entered into repayment? Or is it based off what I owe now ($210,000)? And is it calculated based off a term that is 10 years from now or 10 years total since when I began repayment 5 years ago (aka 5 more years)? If it is the latter, then I will pay off the loan in 10 years total anyway so PSLF doesn't make any sense for me right?

Unfortunately, speaking with the loan service provider confuses me more and I get a different answer each time I speak with someone. Appreciate your help.

 

[cgossage]

Your payment will be based on the amount you owed when you entered the program, not be amount you currently owe. So it would be based on $180k.

[DMFA]

10-year standard rate for when you entered repayment is the cap for IBR.  Assuming your balance at entering repayment was $180,000, and interest is 6.8%, the 10-year standard payment - and hence the IBR cap - would be =pmt(6.8%/12,120,180000) = $2,071.45.

When you no longer have a partial financial hardship (defined as a calculated monthly payment greater than the 10-yr standard rate above), you stay in IBR, but can't get back into it.

This is probably a stupid question, but you are still employed by a non-profit, right?  Otherwise it's a moot point since your payments wouldn't qualify for PSLF anymore.

[daman42886]

Thank you for the answers. That clears it up for me. I had one person at Nelnet telling me that my payment would be almost $4000 per month, another saying it would be $1100, and a third stating a number in between, but this makes much more sense and is how I interpreted the rule as well.

I am actually not employed by a non-profit right now, but our group has plans to become part of a larger 501(c)(3) hospital system "within 2 years," at which time I would be getting my salary from the non-profit. I have already made almost 5 years of PSLF eligible payments during residency.  I'm just trying to do the math to see how long I can not refinance and continue to pay the Direct loans at the 6.8% interest rate before it no longer makes financial sense.

It seems like even if it takes 2-3 years to join the hospital system, I would still be saving money by staying with the PSLF route even though it would take a total of 12-13 years (instead of 10) for my loans to be forgiven. That's assuming I refinance now with around a 4% interest rate and a 7-10 year term. Thanks again for the help.

[MochaDoc]

daman42886 wrote:

I am actually not employed by a non-profit right now, but our group has plans to become part of a larger 501(c)(3) hospital system “within 2 years,” at which time I would be getting my salary from the non-profit.

Click to expand...

Why is the group not currently part of that non-profit hospital system? What will be changing in two years? Is that change a guaranteed thing?

 

Lastly, could you feasibly pay off your loans within the next 24 months? If "yes," why isn't this your current plan?

[daman42886]

Unfortunately, nothing is guaranteed, but we are in the final stages of negotiation with the hospital system. Of course, if things aren't looking promising within the next year or so I may just refinance anyway. M threshold to just refinance is not that high.

In regards to paying the loan off within the next 24 months, that would be pretty tough for me. In addition, I may be doing the math wrong, but if I do the PSLF with a $2071 monthly payment for let's say 8 more years, at which time the loan is forgiven, then I would have paid a total of $198,816. Wouldn't I be saving money (and potential short term financial constraints) by doing that instead of paying the total $210,000 in two years?

[MochaDoc]

There are a lot of unnecessarily moving parts/unknowns here. It seems to me that you essentially chose the "refinance with 2-3 year payoff" option when you signed your contract with a non-501(c) entity and now you're hoping, or were promised, that this for-profit will transition into a non-profit allowing you to have your cake and eat it too.

12-13 year (including the 5 you've already spent paying) pay off timeline seems like a ridiculously long time to have student loans.

This stranger from the internet's recommendation: refinance your student loans, pay them off in 3 years and move on with your financial life.

[daman42886]

Agree, there are a lot of unknowns. Will mull it over and make a decision soon. Appreciate the advice.