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Idea to enter REPAYE early

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  • #46
    My wife has worked our whole marriage so just over 5 years. I was able to work for about 7 months before med school started. So we just threw everything we could at tuition and loans. My school wasn't cheap, ~60k/year so the thought of going 300k or 400k in debt terrified me.

    My loan servicer is Great Lakes, they mentioned that I will be in repaye for only 12 months and if I wanted to continue in Repaye I would have to submit new information for this tax year. I can begin submitting that paperwork to them in April I guess.

    So regarding the interest subsidy, will it just show on great lakes that 50% interest payment to my account from the government since my monthly payment is $0?

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    • #47
      i tried to forgo my grace period via consolidation circa 2011, and was denied by the higher powers that be.  I wish this post was around back then to guide me with a stronger, well-informed, hand.  I subsequently lost those 6 months and the next 3 months after, as I was placed in administrative forbearance for consolidation and IBR certification (  ).  That's an extra 9 months of PSLF that didn't have to happen.

      I bring nothing to this thread, other than what could have been comments, and a self-therapy session.

      Comment


      • #48
        Coug16, Nice! Could I share your statement, "We just threw everything we could at tuition and loans. My school wasn’t cheap, ~60k/year so the thought of going $300k or $400k in debt terrified me," with medical school students when I speak to them?

        The rules require you reapply for income-driven repayment plans annually. In my experience the loan servicers allow you to reapply 60-90 days prior to your anniversary date (August).

        That's a good question about what your statement will show. Would you post it when it arrives? Meanwhile, I'll check with a couple of clients to see if they would be willing to share a statement.

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        • #49
          Active Duty, Thanks for your service. My father, husband and son served in the Air Force.

          I feel your pain about the grief administrative-powers-that-be cause. And congratulate you on self-therapy!  

          Have you checked into the new REPAYE? It's been beneficial to some (not all) physicians who consolidated when you did.

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          • #50
            My first billing statement for $0 is due July 17th. The billing statement doesn't have any area that discusses the interest subsidy, and I assume the subsidy will post after my $0 payment is "received". I plan to update this thread with my bill once I have those answers.

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            • #51




              So I followed the advice in this thread and I’m really excited about it working out well. I submitted my loan consolidation toward the middle of June and it has gone through and been finalized. My monthly payment is $0 and starts the middle of August and runs for 12 months in Repaye. I will have to submit paperwork in April of next year to stay in Repaye. Depending on how much money my wife makes in the coming years I will probably stay in Repaye throughout residency and refinance just before starting as an attending. My goal is to pay off my loans within 3 years out. Shooting for one year but that might be ambitious as I do owe $150K. The interest on my consolidated loans is 5.85% so my effective interest rate for the next year with the 50% interest subsidy should be 2.925%. Hard to beat that. Also, I took out about 15k extra just before graduation for moving costs, etc. We used some of that money to max out my wife’s and my roth IRAs. I don’t like the idea of purchasing on margin but the ability to max out this space that we might not be able to access if the future with tax free growth was to hard to pass up. Especially since we have the goal to pay off our loans so quickly while my IRA will have the chance to grow tax free for another 30-40 years.

              Has anyone actually received the government subsidy? How does that part actually work?
              Click to expand...


              Has anyone actually received the government subsidy? How does that part actually work?

              The servicer applies a monthly credit usually described as "subsidy" or "interest subsidy".  Check your account transactions in late-August or September.

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              • #52
                Yes, that would be fine if you shared it. Thank you for your help.

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                • #53
                  Hi mamead ,

                  Do you have any update on this?  I am in the same situation as you (REPAYE with $0 payments) and I do not notice the interest subsidy anywhere.

                   

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                  • #54
                     

                     

                    I don't suppose there's any way you could post a de-identified statement...? I'd expect under where it says "interest satisfied" there would be something.  If not, then where it says "outstanding interest," if it's less than (rate/12) x principal x # months, then some has been subsidized.

                    https://studentaid.ed.gov/sa/sites/default/files/income-driven-repayment-q-and-a.pdf page 24

                    The language they use is "the government pays the interest," but leaves it completely open as to how that actually occurs.  Classic government...

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                    • #55
                      I just logged onto Great Lakes to check out my situation. I see a tab called interest subsidy which is slightly greater than 50% of the interest that I have accumulated since reconcilidating. I'm confused though because it does not show as either a credit or charge to my total loan balance. Just say the amount of the interest subsidy but the total is the same. I'll have to give them a call and report back. If I can figure it out I'll post a screenshot of what I see.

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                      • #56




                        Have you checked into the new REPAYE? It’s been beneficial to some (not all) physicians who consolidated when you did.
                        Click to expand...


                        I have only briefly looked in to REPAYE.  I am currently enrolled in the IBR plan and have been since 2011.  REPAYE would lower my monthly payments, but I have some concern with switching plans given the potential for change to the PSLF program (taxed, capped, etc.).  I remember reading awhile back that it may be safer to stay in your currently plan for "grandfather" protection.  Forum thoughts?

                        I'm currently at 54 qualifying payments (almost 1/2 way there) with principal balance of $165K.

                        Comment


                        • #57




                          Hi mamead ,

                          Do you have any update on this?  I am in the same situation as you (REPAYE with $0 payments) and I do not notice the interest subsidy anywhere.

                           
                          Click to expand...


                           

                          I haven't quite figured it out yet. My loans are through fedloan and there is no indication of an interest subsidy coming in. I called last week and talked with a rep who was not that useful. He basically told me to trust them, and that I might not see the interest subsidy post to my account, "but trust me, it's there."

                          ???

                          I've been pretty busy this week so didn't get a chance to call again. Nothing really has changed on my account. I sent this email today and will report back when I get some clearer answers:

                           

                           

                          "In May, I applied for reconsolidation of my student loans which were serviced by Nelnet. On June 11, 2016 I received notice that the consolidation was complete. Total consolidation balance was $212,071.79 at 6.000% with a disbursement date of 06/10/2016.

                          On June 11, 2016, I received a notice that my consolidation was in an administrative forbearance, but would continue to accrue interest during this time. $730.08 of interest would be capitalized on 07/01/2016.

                          On June 26, 2016, I received my first monthly bill. The original balance was listed as $212,073.28 (not $212,071.79). This is a small difference, but I do not understand why my balance was changed.

                          On July 27, 2016, I received my second monthly bill. The current balance is $212,803.36 ($212,073.28 + $730.08 in interest).

                          I have been enrolled in REPAYE since the beginning and have yet to see any mention of the 50% interest subsidy to be paid by the government. I have copied an explanation of this benefit from the studentloans.gov website:

                          "Under the REPAYE Plan, if your calculated monthly payment doesn’t cover all of the interest that accrues, the government will pay...half of the remaining interest that is due on your unsubsidized loans (including the unsubsidized portion of a consolidation loan), during all periods, ... If the monthly interest that accrues on your unsubsidized loans is $30, but your monthly REPAYE Plan payment covers only $20 of this amount, the government will pay $5 of the remaining $10 in interest during all periods."

                          I have not yet seen any mention of this payment on my account. My current monthly payment is $0, so half of my accruing interest should be paid by the government.

                          Please explain why this is not occurring, and why my principle balance changed from May to June."

                           

                           

                          Comment


                          • #58
                            @mamead:

                            I can't explain the $1.49 you picked up in principal...

                            Interest accrues daily, meaning you'd accrue (6%/365) * 212,073.28 = $34.86 per day, if half is subsidized then $17.43/day.  You should be accruing about (6%/12) * 212,073.28 = $1060.36 each month.  If half is subsidized, you should be responsible for about $530.18 each month.  The fact that you haven't picked up as much as you should have makes it seem like it's being subsidized.

                            Using the amount you've accrued, 730.08 / ([6%/365] * 212,073.28 * 0.50) = 42.  If there were 42 days between when the loan started and when that accrued interest was stated (i.e. or July 22), then that would be equal to the amount you've accrued.

                            Follow it out to the next statement and see if that trend continues.  I too would be wary when the government just says "trust me," but those numbers are at least a bit reassuring.

                            Comment


                            • #59







                              Have you checked into the new REPAYE? It’s been beneficial to some (not all) physicians who consolidated when you did.
                              Click to expand…


                              I have only briefly looked in to REPAYE.  I am currently enrolled in the IBR plan and have been since 2011.  REPAYE would lower my monthly payments, but I have some concern with switching plans given the potential for change to the PSLF program (taxed, capped, etc.).  I remember reading awhile back that it may be safer to stay in your currently plan for “grandfather” protection.  Forum thoughts?

                              I’m currently at 54 qualifying payments (almost 1/2 way there) with principal balance of $165K.
                              Click to expand...


                              I'm surprised you did IBR given that PAYE has 33% lower monthly payments (10% of disposable income instead of 15%).  You may no longer qualify to switch to PAYE since you might not still have a partial financial hardship (if your PAYE/IBR calc > 10-yr standard payment), and if you did switch plans, any interest you still owe (you might not have any anymore, being 54 payments in) would capitalize.  Changing plans does not eliminate your PSLF payments; only consolidating does that (because your PSLF-paid loans get erased and a new loan is created).

                              If you make Major (LCDR?) next year as I'm extrapolating from your 2011 date, the jump to O-4 and 6 years will bump your AGI by $15,157.60 (base pay and VSP, not including if you get changes to any other special pays such as finishing residency), so re-calculate what your monthly payment will be.  If you're still active duty, especially if you still will be 5 1/2 years from now, you should do whatever results in paying as little as possible over the life of the loan since you can get PSLF.

                              Finally - and this is pretty unlikely given that you're 4 1/2 years in - if your income-driven amount was near the 10-yr standard relatively early on in the 10 years of PSLF, then you can actually end up paying LESS over that time (despite forgiveness) by doing a private refi to a lower rate and paying it off.  This is actually the case for my wife.  This is why it's so important to run your math thoroughly.

                              Comment


                              • #60




                                I just logged onto Great Lakes to check out my situation. I see a tab called interest subsidy which is slightly greater than 50% of the interest that I have accumulated since reconcilidating. I’m confused though because it does not show as either a credit or charge to my total loan balance. Just say the amount of the interest subsidy but the total is the same. I’ll have to give them a call and report back. If I can figure it out I’ll post a screenshot of what I see.
                                Click to expand...


                                How much interest has accrued over how long of a term?  Does it line up with the calculation for how much was supposed to accumulate in that time period?

                                Comment

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