Announcement

Collapse
No announcement yet.

Idea to enter REPAYE early

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • DebtDoc
    replied
    I am planning to consolidate my loans to enter REPAYE upon graduation, but was wondering if it is worth it to include Subsidized and Perkins Loans in the consolidation if not planning on PSLF?

    One of my subsidized loans qualifies for having all grace period interest covered by the government (so no reason to consolidate it for REPAYE early as only half interest would be covered for the grace period). For the other subsidized loans without grace period subsidized interest, I could consolidate at graduation with no capitalized interest and initially half interest covered through $0 monthly REPAYE payments, or let them accrue interest during the grace period which would then capitalize, but benefit from REPAYE covering 100% of unpaid interest for the first 3 years on subsidized loans.

    With some rough math, consolidation would give me 6 months of 1/2 interest with $0 monthly payments and then 2/3 interest under REPAYE after that. Not consolidating would have 6 mo of full interest which then capitalizes, followed by 1/3 interest for 3 years under normal REPAYE payments. Using $10,000 and 4.5% full interest rate, consolidation would accrue $112.50 interest in the first 6 months and then $1350 total in the next 3 years for about $1450 interest in 3.5 years. Not consolidating would capitalize at 6 months for a principal of $10,225 and then accrue $460 interest in the next 3 years for a total of $225 principal capitalization and $460 interest in 3.5 years. After the 3.5 year mark, both loans would be at 2/3 interest through REPAYE, albeit with a slightly higher principal on option 2.

    Additionally, how do Perkins loans factor into this? Do they have grace period interest fully subsidized? If so, I would likely not want to consolidate them, but then they could not be used for REPAYE after the grace period, so I am not sure what payment plan would work best for them in that case.

    For unsubsidized loans, REPAYE early through consolidation saves a few thousand in interest during the period of $0 monthly payments and also avoids capitalization of accrued grace period interest, so it seems consolidation is the best option for those.

    Leave a comment:


  • brandonp63
    replied
    I see the benefit of entering REPAYE early so as to have the government pay half the unpaid interest accumulating on loans. However, when you consolidate after graduation, isn't all interest that had accumulated throughout school immediately capitalized? So by entering REPAYE early, you are missing an opportunity to pay off as much accumulated interest as possible before it is capitalized at 6 months. Thoughts?

    Leave a comment:


  • Ryderman
    replied
    "Paying extra monthly on top of the minimum required reduces the government REPAYE interest subsidy.

    For example, imagine the interest due is $800 and the borrower wishes to pay $1,000 extra. Always, the servicer applies the payment first to the interest ($800). The remainder ($200) goes toward the principal. $0 interest subsidy.

    The “Work Around” is to make two payments each month. For example, on the first of the month you make your REPAYE payment. The remaining unpaid interest due is $800. The government subsidy pays $400. You make an extra payment on the second of the month –$400 goes toward the interest and $600 goes toward the principal. If you make the extra payment on the same day as the REPAYE payment, the interest subsidy will be lost."

     

    Can anyone confirm that this "work around" works? I'm trying to decide if I should refinance or do REPAYE for PGY1 year. My wife and I will both be making ~53k next year but didn't have jobs this past year. If I apply for REPAYE in May, I should have a $0 dollar payment but would nevertheless like to put as much money towards loans as possible. Could I do the "work around" above and take advantage of the government interest subsidy AND start paying down my principle or would it be better to refinance with a private company? I am not interested in loan forgiveness.

    Leave a comment:


  • dent_res222
    replied
    Is there any negative to consolidating federal loans and starting REPAYE if I'm a single dental school resident who has no income (and won't) until residency graduation in 1.5 years? I feel like I haven't found a lot of similar cases because the other medical residents are paid.

    It would only benefit me to take my loans out of "in-school deferment" and have the government pay some of my interest with the REPAYE program, correct? Or is there a benefit to keeping all my loans in this deferment period until I graduate and have an income?

    Leave a comment:


  • Dmarigs
    replied
    Future Doc thanks for responding.
    I will not be planning on PSLF. I plan to refinance as an attending (Ortho) and pay it off ASAP. My scenario is suppose you have 200k in debt at 6% interest, and cant quite afford 2200 per month in the standard payments. So you sign up for RePAYE, consolidate early, and get the $0. But you are willing to pay ~ 1800 every month during residency, in order to cover the interest and hopefully reach the principal.

    Is that a good idea, especially if the goal is to help your attending self?
    Especially if you enlist the “Work Around” posted by Joy Sorensen earlier

    Work Around
    Make two payments each month. For example, on the first of the month you make your REPAYE payment. The remaining unpaid interest due is $800. The government subsidy pays $400. You make an extra payment on the second of the month –$400 goes toward the interest and $600 goes toward the principal. If you make the extra payment on the same day as the REPAYE payment, the interest subsidy will be lost.

    Leave a comment:


  • FutureDoc
    replied
    Dmarigs, whether there is any benefit to paying down the interest depends on whether or not you are planning on PSLF.

    Also you will have zero dollar payments until spring of intern year due to the fact that your IDR payments are based on the previous year's income (unless you filed jointly with an earning spouse).

    Leave a comment:


  • Dmarigs
    replied

    Hey guys I had a question, For the times that you can consolidate early and get those $0 Payments. Is there any benefit to Paying Down the accruing interest? Also in general suppose your payments are $300 For REPAYE Intern year. Is there any benefit to paying > $300 dollars if you can comfortably?


    Leave a comment:


  • kzbt19
    replied
    I'm an M4 hoping to match into Psychiatry next month. If I don't plan to do PSLF (but am not 100% sure), is it a bad idea to do consolidation and REPAYE during residency? I have ~180k in direct unsubsidized loans with interest rates between 5.3% to 6.2%, and they've gained ~25k in interest while I've been in medical school (sad face). I've been reading a lot about early consolidation and REPAYE on this forum and blog, but since I'm tentatively planning to refinance when I'm an attending, wondering if it's my best option. Thank you!

    Also, my fiancee has about the same amount of loans but his are from undergrad and his masters program. We can't (or maybe shouldn't?) consolidate together, right? EDIT: Just saw on another thread that consolidating loans between spouses is not a thing.

    Leave a comment:


  • ktehc
    replied
    If I am taking Spring quarter off and thus dropping below half-time student status, will loan servicers view that as eligible to apply for consolidation/RePAYE? Unfortunately, my official graduation date isn't until June 15th (though I'm done with all requirements as of March 23rd), which really minimizes the window for me to get everything done between then and my first residency payment. Granted, it's not a huge amount of money in my case, but if it would be available to me, then I'm goin' after it. Thanks!

    Leave a comment:


  • AMedStudent
    replied
    Just wanted to bump this thread because the information in it is so useful. I can confirm that it works nicely. I submit my consolidation request the week after graduation, that took a while to be processed and had a few hiccups (my school had my "out of school" date set to June 1 instead of May 20 like it should have been) but I just had to keep calling and staying on top of them. I chose to go with great lakes as my loan servicer and they've done an adequate job. My first $0 payment was something like August 1.

    Share this thread with people you know who are approaching graduation in the spring!

    Leave a comment:


  • debtfordays
    replied
    I really appreciate everybody's contribution to this thread. It makes a really confusing subject less confusing. From what I understand, the point of consolidating loans is to allow you to waive the grace period and allow you to enter repayment early allowing you to enter REPAYE early. I am trying to get enrolled into REPAYE before the Trump administration possible removes it.

    My situation is complicated by the fact that I am in the Army National Guard who will pay off some of my loans (40k before taxes), but I'm assuming they'll only pay off my loans I received during dental school (and not medical school which I am currently enrolled in). My question is, would I be able to waive my grace period by only consolidating some of my loans (ideally the minimal amount required)? I would like to keep as many of my loans as separate as possible.

     

    Thanks,

    debtfordays

    Leave a comment:


  • wakaflakaflocculus
    replied
    There's an add loans form that should be able to add your in school loans to the consolidated loan as long as thats done within 120 days of the first loan.  I plan to send that in once I graduate with a letter attached reminding them I want to enter repaye immediately and waive the grace period on those loans also since its not stated again on the add loans form.  If you haven't been approved for repaye yet I would wait to send that form in until you graduate.

    Leave a comment:


  • job103d
    replied
    I read bits of this thread and thought it a good idea to consolidate ASAP.  I did so, but only a few of my loans could be consolidated because I am "in school" for another few weeks.  Can I just consolidate again and try to enter REPAYE after I graduate?

    Leave a comment:


  • mlopez02
    replied
    Yes after checking into it myself it was a single loan that was disbursed over 2 semesters. I owe 45k.

    Leave a comment:


  • FutureDoc
    replied
    So it's normal for federal loans to be disbursed over two semesters, sadly that doesn't mean that you have multiple loans.  I double checked on studentloans.gov and there doesn't seem to be a way to transfer.  How large are your loans for the last year of school?

    Leave a comment:

Working...
X