Ending IBR

[Med0000]

I called my servicer about ending my IBR since my income has risen and was told that I would need to pay an exit fee. This exit fee is ~$2000 (or one standard payment) and is applied toward outstanding interest.

This fee caught me by surprise. I have never heard of this fee before. Is this legit? Does anyone have any knowledge of this?

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[DrBowtie]

I called my servicer about ending my IBR since my income has risen and was told that I would need to pay an exit fee. This exit fee is ~$2000 (or one standard payment) and is applied toward outstanding interest.

This fee caught me by surprise. I have never heard of this fee before. Is this legit? Does anyone have any knowledge of this?

Doesn't your IBR payment just cap out at the 10 yr repayment rate anyway? Unless you are switching to a graduated or 30 year, no need to exit IBR.
Your loan terms may vary but that was my impression with the federal loans.

 

[Med0000]

We are not comfortable with the monthly payment with 10 yr repayment. We would like to move to graduated standard.

 

[Spydra]

I found this info that might help:

What if I choose IBR and later decide to switch to a different plan?
You can change repayment plans at any time. However, any unpaid interest that has accumulated in IBR would be capitalized when you switched out of the program, which means it will be added to your total loan amount. Also, current regulations require that when you leave IBR, you must go into a 10-year standard payment plan (or longer for a consolidated loan), minus the number of years you were in IBR. If a standard plan is not affordable, you can switch to another plan, but you can only return to IBR if you have a "partial financial hardship".

http://www.ibrinfo.org/faq.vp.html#_What_if_I

3. Ensure borrowers can exit IBR to enter a different repayment plan without prohibitive penalty. Right now, borrowers who want to leave IBR for a different repayment plan can be charged a massive "exit fee." Proposed rules would allow that fee to be reduced through forbearance, but it is left up to the lender. There need to be clear guidelines to ensure borrowers can always exit IBR.

http://www.ibrinfo.org/action_alert_8912_2.vp.html

So it seems like yes you can change your repayment plan and yes the lender can require a large exit fee for doing so. Yet another thing they don't mention clearly upfront.