Graduate/Professional Loan Forgivness

[pharm357]

Hi all,
I wanted to ask about loan forgiveness. What is that really all about? Will they forgive the loan someone awe to the government and not have to pay it at the end after graduating? Is it about reducing the payment each month but extending the time on the loan to be paid?
I need some information because it seems unbelievable to have the loan cancelled and not pay it at the end.

Thank you to all of you to read my post

 

[confettiflyer]

IBRinfo :: Income-Driven Repayment


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[EastBay80]

I've heard there are 2 main kinds: PLSF and PAYE/IBR.
I don't know much about PLSF except that it's 10 years and no tax on amount forgiven. One of the first requirements is, I think, to find a job at a place (non-profit... ) that qualifies for this kind of forgiveness. I'm not sure the detailed requirement.
PAYE/REPAYE/IBR/IBR for New Borrowers: it's 20 years or 25 years. It depends on the year you first took out your federal loan ever... It helps students who have low income for 20-25 years and have huge loans (like 200k+)

 

[pharm357]

IBRinfo :: Income-Driven Repayment


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Hi,
do you think this worth it? Let say am on one of those plan for 25 years of repayment. Will this affect my credibility like when it comes to buy new house because I think it will show that I have unpaid debt.
Any advise? Have you done one of these and what you recommend especially if you know you are going to be pharmacist?

Thank you

 

[confettiflyer]

Hi,
do you think this worth it? Let say am on one of those plan for 25 years of repayment. Will this affect my credibility like when it comes to buy new house because I think it will show that I have unpaid debt.
Any advise? Have you done one of these and what you recommend especially if you know you are going to be pharmacist?

Thank you

You will probably make too much money to have anything left at 25 years to forgive.

As for student loans, lenders will usually take 1% of your total loan balance and use that as the monthly payment used to qualify for a loan. That means if you have a $230k balance loan and only pay $1200/mo due to an income based plan, lenders will use $2300/mo to calculate.

That means if you gross $12,500/mo, assuming no other debt, the maximum mortgage payment with impounds per month you can take on in the standard private mortgage market (DTI 43%) is $4386/mo vs. $5375/mo had you had zero debt.


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[pezdispenser]

That means if you gross $12,500/mo, assuming no other debt, the maximum mortgage payment with impounds per month you can take on in the standard private mortgage market (DTI 43%) is $4386/mo vs. $5375/mo had you had zero debt.

Where did you get these numbers from? Even a $4386 PITI (35% front-end DTI!) is ludicrous.

 

[gwarm01]

You will probably make too much money to have anything left at 25 years to forgive.

Seconding this. I'm on the 10 year public service plan with pay on the lower end of the pharmacist scale, and I'm well on my way to paying off my loans before forgiveness kicks in. Even if I reduced my income from outside my primary source, I'm still looking at a maximum of around 2-5k forgiven on a 150k original loan balance.

Where did you get these numbers from? Even a $4386 PITI (35% front-end DTI!) is ludicrous.

California prices homey.

 

[FlavyFlav]

When we bought our house, I was approved for a house using my current IBR payment, not 1% of loan. Different lenders can approve on different terms, you'll just have to shop around and have all of your debts prepared.

 

[rxdawg21]

Seconding this. I'm on the 10 year public service plan with pay on the lower end of the pharmacist scale, and I'm well on my way to paying off my loans before forgiveness kicks in. Even if I reduced my income from outside my primary source, I'm still looking at a maximum of around 2-5k forgiven on a 150k original loan balance.


California prices homey.

Which plan are you on. On PAYE our payment is <$700 a month after maxing out 401k

 

[gwarm01]

Which plan are you on. On PAYE our payment is <$700 a month after maxing out 401k

I'm just on the standard IBR plan. Maybe I should do a little research, because I'm paying twice what you are currently.

 

[owlegrad]

I'm just on the standard IBR plan. Maybe I should do a little research, because I'm paying twice what you are currently.

Standard IBR plan has you repaying within 10 years? I don't remember the details but I thought standard repayment even without ibr was 20 years?

 

[rxdawg21]

I'm just on the standard IBR plan. Maybe I should do a little research, because I'm paying twice what you are currently.

So there is PAYE, REPAYE and IBR. IBR is the worst and is 15% of your gross income (my wife makes about 110k year and we deduct the full 401k plus insurance to get our AGI).

PAYE and REPAYE are both 10% of your gross income, or 1/3 of what you are currently paying. PAYE is the best as if you are married or get married you don't have to include your spouses income. REPAYE includes spouses income no matter what. You only qualify for PAYE if you took your loans out during certain years (don't remember off the top of my head, quick google search and you can find this info). REPAYE is literally for everyone else that doesn't qualify for PAYE and started 2-3 years ago specifically for that purpose.

 

[gwarm01]

Standard IBR plan has you repaying within 10 years? I don't remember the details but I thought standard repayment even without ibr was 20 years?

IBR just has you pay 10% of your AGI and can extend your payment up to 25 years before forgiveness. It just so happens that 10% of my income over 10 years is just about equal to my loan burden.

So there is PAYE, REPAYE and IBR. IBR is the worst and is 15% of your gross income (my wife makes about 110k year and we deduct the full 401k plus insurance to get our AGI).

PAYE and REPAYE are both 10% of your gross income, or 1/3 of what you are currently paying. PAYE is the best as if you are married or get married you don't have to include your spouses income. REPAYE includes spouses income no matter what. You only qualify for PAYE if you took your loans out during certain years (don't remember off the top of my head, quick google search and you can find this info). REPAYE is literally for everyone else that doesn't qualify for PAYE and started 2-3 years ago specifically for that purpose.

I'm on the older IBR that is 10%, but it takes my wife's income into account. I'll have to look into PAYE and see if that helps. Thanks for the tip.

edit: just checked the fedloan site, and it claims PAYE also includes your spouses' income.

• "For married borrowers filing a joint federal income tax return, the spouse's eligible loan debt and Adjusted Gross Income (AGI) is also considered when determining eligibility and calculating the payment amount."

I knew it was too good to be true!

Edit #2: also maybe I was wrong and I am getting 15% instead of 10%

 

[Monsterdaddy]

edit: just checked the fedloan site, and it claims PAYE also includes your spouses' income.

• "For married borrowers filing a joint federal income tax return, the spouse's eligible loan debt and Adjusted Gross Income (AGI) is also considered when determining eligibility and calculating the payment amount."%

If you verify income with a joint tax return then of course your wife's income is included. But unlike REPAYE, under PAYE or IBR you can file married filing separately or use alternative income documentation to exclude your spouse's income.

 

[confettiflyer]

Where did you get these numbers from? Even a $4386 PITI (35% front-end DTI!) is ludicrous.

Back end DTI assuming no other debt aside from the 1% student loan calc. Obviously adjust for local conditions and/or expensive automobile proclivities.


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[confettiflyer]

If you verify income with a joint tax return then of course your wife's income is included. But unlike REPAYE, under PAYE or IBR you can file married filing separately or use alternative income documentation to exclude your spouse's income.

Except in community property states, at which point you must file alternative documentation and describe that situation and await DOE's response.


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[confettiflyer]

When we bought our house, I was approved for a house using my current IBR payment, not 1% of loan. Different lenders can approve on different terms, you'll just have to shop around and have all of your debts prepared.

I'll add to this, local lenders have greater authority to bend guidelines, and jumbo loans especially since there is no secondary market for those and those loans are typically held in portfolio.

Slightly off topic: don't forget that this is a great time to start a small business and write off the capital losses on your personal taxes (either as a sole prop., LLC, or s-corp). If it becomes profitable, revoke the s-election and file separately, keeping the initial losses with you but the income with the company. That's a dollar for dollar AGI drop.


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[Monsterdaddy]

Except in community property states, at which point you must file alternative documentation and describe that situation and await DOE's response.

That is true, thanks for reminding me! But you would only use alternative income documentation if your spouse's income was greater than yours.

Now if your spouse doesn't work or makes very little then a community property state and married filing separately status is golden!

I have done alternative income documentation 2 years in a row and there was no hassle. The loan servicer handles the payment calculation. (Thanks FedLoans!)

The LLC idea is interesting. Too bad in community property states half the losses also go to the spouse.

 

[TerryTerry]

They forgive your loan if you are in some kind of government program and spend 10 years or so working there.

They forgive your loan if you are enrolling in income-based-payment-plan and continuously renew it for 20-25 years without skipping payment.
However, the forgiven amount will be considered as income that year and you will have to pay tax. Ultimately, you will end up paying more... but some people still prefer this because life is uncertain and some people find paying 20 years worth of loan payment ASAP stupid.

I can understand them because sometime I am not sure myself if I will still be alive next week let alone 10 years later.

 

[gwarm01]

If you verify income with a joint tax return then of course your wife's income is included. But unlike REPAYE, under PAYE or IBR you can file married filing separately or use alternative income documentation to exclude your spouse's income.

I used our tax return because I was afraid only sending in my pay stubs would lead to the eventual denial of my loan forgiveness. I'm sure they would look for any possible reason to deny once people start cashing in on the deal.

 

[Monsterdaddy]

I used our tax return because I was afraid only sending in my pay stubs would lead to the eventual denial of my loan forgiveness. I'm sure they would look for any possible reason to deny once people start cashing in on the deal.

Why? Your pay stubs only determine the amount of your loan payments and have absolutely nothing to do with whether you will eventually be granted forgiveness.

 

[gwarm01]

Why? Your pay stubs only determine the amount of your loan payments and have absolutely nothing to do with whether you will eventually be granted forgiveness.

I believe the wording is that you can submit a paystub as an alternative form of income verification if your tax return does not reflect your current income. I don't think its outside of the realm of possibility that they will require you to submit tax returns or something else of that nature before granting you full forgiveness. Something to ensure people didn't take advantage of program and are fulfilling their terms.

If I'm off base or missing something then please let me know. I would love to cut that payment down and still qualify.

 

[pezdispenser]

Back end DTI assuming no other debt aside from the 1% student loan calc. Obviously adjust for local conditions and/or expensive automobile proclivities.


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I still doesn't add up. You used a $230k student loan example, so 1% of that is $2,300.
$5,375 minus $2,300 leaves $3,075 for the housing payment.
You also have to take note of front-end DTI limits of 28-31%. The $3,075 is ok at 25%.

 

[Monsterdaddy]

I believe the wording is that you can submit a paystub as an alternative form of income verification if your tax return does not reflect your current income. I don't think its outside of the realm of possibility that they will require you to submit tax returns or something else of that nature before granting you full forgiveness. Something to ensure people didn't take advantage of program and are fulfilling their terms.

If I'm off base or missing something then please let me know. I would love to cut that payment down and still qualify.

I think you are being overly paranoid. IBR, PAYE and REPAYE are separate programs apart from PSLF. PSLF has many requirements -- one part of which is the requirement to be enrolled in one of these payment plans. It does not make it contingent you paid the MOST you could have paid, only that you met the criteria. I remember some Google search referencing the Dept of Ed allowing borrowers to pick the income verification type that allows you the smallest payment (as long as it is accurate).

For example I read somewhere that if you live in community property states where the other spouse earns a lot more the Dept of Ed allows the borrower to use alternative income documentation to lower their payment to reflect only the borrower's income.

EDIT: Found that link: https://studentaid.ed.gov/sa/sites/default/files/income-driven-repayment-q-and-a.pdf

 

[confettiflyer]

I believe the wording is that you can submit a paystub as an alternative form of income verification if your tax return does not reflect your current income. I don't think its outside of the realm of possibility that they will require you to submit tax returns or something else of that nature before granting you full forgiveness. Something to ensure people didn't take advantage of program and are fulfilling their terms.

If I'm off base or missing something then please let me know. I would love to cut that payment down and still qualify.

This is very odd to read. Do you want me to send you the DOE manual on processing PSLF claims?

But more often than not a tax return will provide a better payment because the AGI contains all those juicy deductions and income reduction that a pay stub cannot convey.

I initially was compelled to use pay stubs because my tax return was very VERY clearly not indicative of current income (my resident pay, hah), so one ca make the argument that what represents current income = the best for compliance.


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[confettiflyer]

I still doesn't add up. You used a $230k student loan example, so 1% of that is $2,300.
$5,375 minus $2,300 leaves $3,075 for the housing payment.
You also have to take note of front-end DTI limits of 28-31%. The $3,075 is ok at 25%.

No, no one is paying $2300 a month. That is a fiction used to qualify someone for a mortgage.

I used an "actual payment" of like $1000/mo under an IDR, but that number will fluctuate as well depending on income.

I pretty much used me as an example, if that helps.


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[pezdispenser]

No, no one is paying $2300 a month. That is a fiction used to qualify someone for a mortgage.

I used an "actual payment" of like $1000/mo under an IDR, but that number will fluctuate as well depending on income.

I pretty much used me as an example, if that helps.


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It seems you don't understand the concept of the front-end debt to income ratio. You take the maximum back-end DTI, which in this example we are using 43% of $12,500 monthly gross income = $5,375. This is the maximum for ALL of your debt payments including your student loan AND the mortgage you're trying to qualify for. Then you subtract the 1% of your student loan balance, which I agree, is just a fictional amount used in the calculation when you are on IBR/RE/PAYE. $5,375 - $2,300 = $3,075. That is the front-end DTI or the maximum housing payment.

Why Debt To Income Matters In Mortgages | Bankrate.com

 

[confettiflyer]

It seems you don't understand the concept of the front-end debt to income ratio. You take the maximum back-end DTI, which in this example we are using 43% of $12,500 monthly gross income = $5,375. This is the maximum for ALL of your debt payments including your student loan AND the mortgage you're trying to qualify for. Then you subtract the 1% of your student loan balance, which I agree, is just a fictional amount used in the calculation when you are on IBR/RE/PAYE. $5,375 - $2,300 = $3,075. That is the front-end DTI or the maximum housing payment.

Why Debt To Income Matters In Mortgages | Bankrate.com

Missed your comment about front-end DTI, you kind of snuck it in there in the end. I don't know where you are getting those figures about 28-31% front-end DTI (actually I think I do, are you quoting FHA guidelines?), but most conventional lenders will easily exceed that (depends on loan program, investor, etc..). I hope pharmacists aren't getting FHA loans, that's stupid.

FNMA DU 10.1 guidelines state only a back-end DTI of 50% is needed to be met for manual underwrite:

New DU Version Eases DTI Requirements

(see comments below it, a few mortgage bankers discuss conventional underwriting and max front ends in the 40's)

https://www.fanniemae.com/content/announcement/sel1706.pdf

page 1 of the above



EDIT: I looked at that bankrate link you listed, that's hella old info dude, no one's used 28/36 in a looong while.

 

[confettiflyer]

It seems you don't understand the concept of the front-end debt to income ratio. You take the maximum back-end DTI, which in this example we are using 43% of $12,500 monthly gross income = $5,375. This is the maximum for ALL of your debt payments including your student loan AND the mortgage you're trying to qualify for. Then you subtract the 1% of your student loan balance, which I agree, is just a fictional amount used in the calculation when you are on IBR/RE/PAYE. $5,375 - $2,300 = $3,075. That is the front-end DTI or the maximum housing payment.

Why Debt To Income Matters In Mortgages | Bankrate.com

Now you make me want to look at what my front end DTI was when I bought my house. That figure was essentially ignored when I went through the process.

EDIT: no wonder it never came up, it was like 15%. I still stand by my statement that the final arbiter of loan approval will be the BE DTI.

The old days say 28/36 as the standard bearers, then BE DTI creep ensued and now we're at like some crazy 50% for FNMA (used to be you'd only be able to get to 50% under FHA w/ a credit score > 620 and some MIP fees).

 

[confettiflyer]

So let me do a final final and clean this one up:

Monthly income: $12,500
Student loan balance: $230,000
Payment used for balance (1%, depends on program): $2300/mo
***Actual payment under REPAYE (theoretical): $1000/mo (approx AGI $150k, household of 2. Lots of estimating here)

Theoretical max back end DTI calculated by lender (I'll use 43%) = $5375
Theoretical max PITI as calculated by lender = $5375-$2300 = $3075/mo

oops, f*ck me, you're right. i'm transposing theoretical $2300 and actual $1000/mo payment.






I owe you a beer.

 

[confettiflyer]

Hi,
do you think this worth it? Let say am on one of those plan for 25 years of repayment. Will this affect my credibility like when it comes to buy new house because I think it will show that I have unpaid debt.
Any advise? Have you done one of these and what you recommend especially if you know you are going to be pharmacist?

Thank you

See my revised #'s post directly above this one, I completely screwed up the #'s and transposed something.

 

[confettiflyer]

Hey @pezdispenser I'm going to invoke the "I just woke up from a nap and was typing all that on my phone" excuse

 

[PharmDBro2017]

Here is a helpful chart OP

 

[pezdispenser]

The old days say 28/36 as the standard bearers, then BE DTI creep ensued and now we're at like some crazy 50% for FNMA (used to be you'd only be able to get to 50% under FHA w/ a credit score > 620 and some MIP fees).

Oh boy, this sounds like another mortgage bubble. Quick and dirty calc (all percentages of gross income):
33% taxes, Social Security, health insurance
43% debt payments - mortgage, student loans, car loans
5% utilities, home maintenance, internet, TV, cell phones
5% gas, car insurance, maintenance
10% food, consumables, etc
===
96% already, and I didn't include anything for 401k, travel, entertainment, children, ...

 

[gwarm01]

This is very odd to read. Do you want me to send you the DOE manual on processing PSLF claims?

But more often than not a tax return will provide a better payment because the AGI contains all those juicy deductions and income reduction that a pay stub cannot convey.

I initially was compelled to use pay stubs because my tax return was very VERY clearly not indicative of current income (my resident pay, hah), so one ca make the argument that what represents current income = the best for compliance.


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If you know of any specific statement from the DOE that would ease my concerns then please share it. Monsterdaddy was right, I am paranoid about this sort of thing. My fear is paying a reduced amount for 10 years, accruing tons of interest, only to be denied forgiveness due to a technicality. Intentionally misrepresenting my income seemed like a big risk just to save a few hundred a month.

If there's way I could reduce my payment and it's 100% kosher with the powers that be, then I would gladly do it. I don't know enough about the technicalities of the student loan system to make that decision, so I just went with the most straightforward approach.

 

[confettiflyer]

Oh boy, this sounds like another mortgage bubble. Quick and dirty calc (all percentages of gross income):
33% taxes, Social Security, health insurance
43% debt payments - mortgage, student loans, car loans
5% utilities, home maintenance, internet, TV, cell phones
5% gas, car insurance, maintenance
10% food, consumables, etc
===
96% already, and I didn't include anything for 401k, travel, entertainment, children, ...

*supposedly* DTI to 50% wasn't a more substantial risk of a defaulted loan. I'm skeptical, but sure I'll play along.

I think elimination of super exotic loans (pick-a-pay, negative amortization w/ recasts @ 120%), general bad ideas (80/20 piggy back...but I guess 97% LTV is practically the same), randomizing appraisers, and calculating ARM's based on a higher interest rate during origination have removed a lot of the systemic risks that took down the show last decade.

Plus, seeing as practically no one built anything for 10 years, I don't think we're in an oversupply.

If this all crashes down it's because some small-handed orange haired cheeto and his racist nazi-like advisor with a giant balding head do damage to the economy by advancing some pro-white immigration policies.


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[pharmasaur]

has anyone actually gotten loans forgived yet through the 10 year plan?

 

[confettiflyer]

has anyone actually gotten loans forgived yet through the 10 year plan?

Zero. Legally not possible until October 2017 as the program came into effect October 2007.


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