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- Mar 13, 2011
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Except in LLUDDS15's example (or any of these examples), you're not decreasing your repayment overall. They all end up paying more by stretching it over 25 years and taking the giant tax hit for forgiveness. But the concept is that a smaller proportion of your income during your early years will go back to paying the loans, and that you'll have the cushion in 25 years to pay the costs.But if you are an owner, and currently the vast majority of dentists are, then it is very easy to fudge your "income" to artificially deflate it to take advantage of these types of payback programs. The people in these programs very much have an incentive to do exactly this, which isn't illegal, to decrease their repayment overall. @LLUDDS15 does exactly this. And many many others. Not saying that they are wrong, just another variable in the equation we are both talking about.
IBR repayments being based on income - realistically speaking, even if you under-pay yourself a first year associate salary for the next 25 years of your life as a practice owner (and that's assuming you start a practice as soon as you graduate) - you will still end up paying it back. Don't believe me? Check out the student loan calculator here: Repayment Estimator . I'm sure you may be able to come out ahead if you pay yourself significantly under a first year salary as a practice owner, but that's a great way to attract IRS attention - they do keep their eye out for things that look fishy like that.
Summary: stretching it out - you don't decrease your overall payment - the taxpayer is not "footing the bill" for a dentist who does 25-year IBR. You're actually increasing it. You just have more income free at the beginning of your career, with the anticipation that you'll have more resources available to pay the jumbo tax hit at the end.
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