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  • REPAYE MARRIED FILING JOINTLY

    Decided on REPAYE. Married. No kids. Would filing jointly increase my min payment? Or does this not affect REPAYE? Does REPAYE look at combined gross income regardless of tax filing status?

  • #2
    1. REPAYE always takes both of your income into consideration regardless of tax filing status

    2. In order to see what the difference in your payments would be go to https://studentloans.gov/myDirectLoan/mobile/repayment/repaymentEstimator.action  and plug in your income/loan details!  That will let you run the numbers and see if REPAYE fits for you.

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    • #3
      REPAYE uses your combined Adjusted Gross Income.

      Comment


      • #4
        (AGI - [1.5 x pov level]) / 120 = RePAYE or PAYE monthly payment.  If you're married, no kids, and in lower 48, the pov level is $16,020.  It's easiest just to use the calculator on the website, though.

        RePAYE: half of unpaid interest gets subsidized, no capitalization while in plan, no cap on monthly payment, spouse income always counted
        PAYE: if pmt < 10 yr std, no interest capitalization; payment capped at 10-yr std, when int does capitalize, principal is limited to 110% of its balance when repayment started; can exclude spousal income if MFS

        If you have very high debt and low income (esp if your spouse earns), will have low-ish income after residency or a very long residency/fellowship without moonlighting, and don't mind losing joint tax filing benefits, then PAYE + PSLF MIGHT be better since you can get the lowest monthly payment if you can be tax-free forgiven after 10 years (if PSLF sticks around).

        For MOST residents, RePAYE is best given the 50% unpaid interest subsidy and no capitalization.

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        • #5
          Thank you for the responses. One additional question. How exactly does REPAYE work once the rest of your income is forgiven? For example, if I owe 450K, enter REPAYE, and my total forgiven amount after 20 years is 200K I am aware that for that year it is added as additional income. My question is, could I potentially owe 100K in taxes? Of course depending on state and tax rate at that time.

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          • #6
            RePAYE is a 25 year repayment for borrowers with graduate loans. Any forgiveness realized, both principal and interest, is considered taxable ordinary income.

            Does your spouse have federal student loans?

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            • #7




              Thank you for the responses. One additional question. How exactly does REPAYE work once the rest of your income is forgiven? For example, if I owe 450K, enter REPAYE, and my total forgiven amount after 20 years is 200K I am aware that for that year it is added as additional income. My question is, could I potentially owe 100K in taxes? Of course depending on state and tax rate at that time.
              Click to expand...


              Yes, if that came to be...but with your income at doctor level, it most likely won't be around long enough to be forgiven.  Those forgiveness figures are for people who rack up way, way too much debt in private schools and then get low-paying (non-doctor) jobs.

              The only (common) non-taxable forgiveness is PSLF, which again was made to forgive the debts of the hard-working, low-income public service employee who just wants to do good for his society...not the doctor with $400k debt who made $50k for 6 years and $500k for 4 and games the system, getting hundreds of thousands of dollars forgiven tax-free.  That's why Sergio (and others) reasonably think that PSLF might be amended to close the "doctors' loophole."

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              • #8
                At $450k, forgiveness is more likely than anticipated.  Please review the attached spreadsheet with a 5-year residency, attending AGI starting @ $250k increasing 3% annually.  In this simulation, the borrower never touches the principal.

                 

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                • #9
                  I don't think the $450k bill clicked in my brain - lack of sleep. Yeah, I agree, majorly consider PSLF.

                  Yeah, if he just pays the minimum it will linger and never touch principal and he'll have a giant tax bill for that non-PSLF forgiveness, but with that much income (+ spousal income?) he ought to be able to afford to refi to a lower rate and pay it quicker, saving about $50k in the process just using 5 yr with 4% avg int (just a quick off the cuff calculation) not even accounting for the massive tax hit.

                  On the other hand, I think there's a role for preference in a lower monthly payment vs total spent over the life of the loan, though the math alone doesn't really support it like you've shown (esp at that rate). But I think that's the philosophy WCI hits on in his "what should I do with my student loans" post, to delay gratification to the greatest extent possible and live like a resident while eliminating debt and building retirement...and I'm totally on board with you about PSLF being too good to be true for some (a lot?) of us with giant debts. I'm scared that loophole will close, and Idk if there will be a grandfather clause...

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                  • #10
                    DMFA, I ignored your post because it made no sense to me. Although I am a physician I am in hardship. $437K in my debt, $75K in wifes. If i attacked in very hard I would not be able to live comfortably. Your talking 6-7K a month to pay off in 10 years. My current employer will be a non profit in about 2 years. So, my plan for now is to do a 30 year standard plan, pay minimum, then switch to REPAYE when non for profit that apply for PSLF in 10 years. IF I was in 200K, I would just destroy it in 3-4years and be done with it.

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                    • #11




                      DMFA, I ignored your post because it made no sense to me. Although I am a physician I am in hardship. $437K in my debt, $75K in wifes. If i attacked in very hard I would not be able to live comfortably. Your talking 6-7K a month to pay off in 10 years. My current employer will be a non profit in about 2 years. So, my plan for now is to do a 30 year standard plan, pay minimum, then switch to REPAYE when non for profit that apply for PSLF in 10 years. IF I was in 200K, I would just destroy it in 3-4years and be done with it.
                      Click to expand...


                      Which post?

                      Your debt sounds very disproportionate between the two of you, especially if your wife is a high earner - you may want to consider filing taxes separately and taking the lower monthly payment with PAYE if you're going to do PSLF.  You'll miss out on a few tax benefits, but might benefit greater in the end since you might pay very much significantly less on loans (if they'll be forgiven).  Will your PAYE or RePAYE really be higher than 30-yr standard with that much interest to cover each month?  And if you're certain it will be forgiven tax free (i.e. you have faith the ****************************************** bureaucrats won't take it away from us), then whatever gives the lowest monthly payment is the best idea.

                      If you go the full term on RePAYE or PAYE, the amount forgiven is taxed.  If you're in the 33% bracket and you have $500,000 forgiven *not* from PSLF, i.e. by going out the complete full term on RePAYE/PAYE, you're on the hook for $167k to the IRS.  That's a bad way to go.

                      Sure, 10-yr standard on $512k at, say, 6.5% is like $70,000/year over 10 years, total $700,000 (assuming standard compound interest).  Let's toss some numbers out here for the sake of example.  If you re-fi that with a private lender on a 5-year term, do a variable rate (can it go up much in 5 years? they start in the low 3s, let's throw an average of 4% out there) and pay it off that way, it's $113,000/year over 5 years, total $565,000.  That's a big difference, having $135,000 more with 5 years to let it grow.  If you're a high earning family like, say, $400,000/yr, say you pay 33% in taxes (prob an overestimate), you're left with $266k, after student loan payments that's $153,000/yr.  You should be able to live comfortably off of that.

                      Now, IDK what you're going to be earning (you haven't revealed that, or your interest rate), so I might be way off; you could be a rookie academic pediatrician or in the military or something, making a quarter of what your med school classmates are making.  (I'm military and my wife is academic Fam Med; I get it.) Living comfortably in the WCI mantra - read the "X-Factor" article in the classics section - isn't living in a 4000 sf house and driving two Audis.  You definitely shouldn't impoverish yourself, but you should definitely be aware of "lifestyle creep."

                      My advice - since I'm a relatively inexperienced amateur who has a limited perspective and knows how to use a few Microsoft Excel equations - is to sit down with a planner.  Lots of them post in these forums and advertise on this site.  Joy and Sergio above, and others (this is neutral ground, lol), are professionals who have helped many people in your exact situation.

                      You're half a million in the hole.  You CAN get out.  It's going to take a little bit of math and a LOT of psychology.

                      Comment


                      • #12
                        I realize I kinda vomited a bunch of figures to demonstrate a point that probably doesn't even apply to you (or most people, really); sorry about the tangential hypothetical. It really looks different once I read it and went "...wait, what?" My B

                        TL;DR version:
                        - given that your debt is 6x your wife's, you *might* benefit most from filing taxes separately, doing PAYE, and getting into PSLF when you can
                        - that just requires faith that PSLF isn't abolished
                        - sit down with a pro
                        - do your best to live a modest lifestyle while in debt

                        Comment


                        • #13




                          DMFA, I ignored your post because it made no sense to me. Although I am a physician I am in hardship. $437K in my debt, $75K in wifes. If i attacked in very hard I would not be able to live comfortably. Your talking 6-7K a month to pay off in 10 years. My current employer will be a non profit in about 2 years. So, my plan for now is to do a 30 year standard plan, pay minimum, then switch to REPAYE when non for profit that apply for PSLF in 10 years. IF I was in 200K, I would just destroy it in 3-4years and be done with it.
                          Click to expand...


                          As DMFA mentions, I do encourage your to seek out professional assistance, whomever that might be.  I encourage this, in part, given your statement: "So, my plan for now is to do a 30 year standard plan, pay minimum, then switch to REPAYE when non for profit that apply for PSLF in 10 years." Given your stated objective of pursuing PSLF, why are you waiting to enter REPAYE?  A 30 year standard plan on $437k @ 7% interest only payment is ~$2,550/month.  An equivalent REPAYE payment would be realized if your AGI = $325k.  The goal when pursuing PSLF is minimize your payments, increasing your PSLF.  Also, by selecting the 30-year standard consolidate repayment you are not benefiting from the REPAYE 50% interest subsidy.

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                          • #14
                            Sergio,

                             

                            Yes, Thank you for your reply. We thought about REPAYE. And, will likely switch to that once we work for a non profit. However, we thought about Standard 30 so at least we could lower monthly payment AND at least touch some principal. The interest would be the same on REPAYE, but if we paid $2100, then our principal would increase. And, what if, my company in 3 years or so decided against being non profit or didn't qualify for it? We would have more debt. So, we thought this would be safest. And if they do change to non profit, REPAYE for 10 years then PSLF. Sound like a good idea?

                            Comment


                            • #15




                              Sergio,

                               

                              Yes, Thank you for your reply. We thought about REPAYE. And, will likely switch to that once we work for a non profit. However, we thought about Standard 30 so at least we could lower monthly payment AND at least touch some principal. The interest would be the same on REPAYE, but if we paid $2100, then our principal would increase. And, what if, my company in 3 years or so decided against being non profit or didn’t qualify for it? We would have more debt. So, we thought this would be safest. And if they do change to non profit, REPAYE for 10 years then PSLF. Sound like a good idea?
                              Click to expand...


                              I'll address your question indirectly to see what you think.

                              Let's assume $437k outstanding at a 6.75% interest rate.  Let's further assume borrower's AGI is $275k Yr 1, $280k Yr 2, ...., $295k Yr 5 with 2 in family. Also, we'll analyze a 5 year repayment window comparing a fully amortized 30 year repayment vs REPAYE:

                              • 30 Year Repayment

                                • $2,834.37/month

                                • $170,062 paid over 5 years

                                • $410,237 principal balance after 5 years of payment



                              • REPAYE

                                • Payments are function of AGI

                                  • $2093/month w/AGI = $275k

                                  • $2128/month w/AGI = $280k

                                  • $2164/month w/AGI = $285k

                                  • $2199/month w/AGI = $290k

                                  • $2234/month w/AGI = $295K



                                • $129,814 paid over 5 years

                                • $445,837 principal balance after 5 years




                              So, you paid $40,248 ($170062 - $129814) more by choosing a 30-year repayment.  But, the principal balance difference is $35,600 ($445837 - $410237). The net difference is $4,828 in favor of REPAYE (over a 5 year period).  To take this to some extreme, you save the difference ($4,828) on a monthly basis ($80.47/month) in 0.75% (net of tax) annual interest bearing account = $4,918 after 5 years.

                              Coupled with PSLF, REPAYE would probably be my choice.

                              Disclaimer - haven't reviewed your actual education loan portfolio.  Only Direct Loans are eligible for PSLF and REPAYE.

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