How does PAYE work?

[1Overdrive]

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Do you apply for Pay As You Earn before getting loans or after you are done with all 4 years?

Also, what would be the possible downsides of PAYE, besides the inevitable tax bomb at the end of the repayment period if you don't pay it all off?

 

[sjv]

You apply for it when you enter repayment.

I don't wanna say something that may not be true so I deleted what I wrote. The program is simply too young and not enough data points to draw conclusions, no one will reach the tax bomb for a long time but that is the main concern.

Do you apply for Pay As You Earn before getting loans or after you are done with all 4 years?

Also, what would be the possible downsides of PAYE, besides the inevitable tax bomb at the end of the repayment period if you don't pay it all off?

 

[1Overdrive]

You apply for it when you enter repayment.

I don't wanna say something that may not be true so I deleted what I wrote. The program is simply too young and not enough data points to draw conclusions, no one will reach the tax bomb for a long time but that is the main concern.

Ah, thanks for the response.

So you can apply any time after repayment (say, even 5 years afterwards?)

 

[sjv]

Ah, thanks for the response.

So you can apply any time after repayment (say, even 5 years afterwards?)

Yeah, but after 5 years at a higher loan repayment, you might as well continue than restart the 20 year clock since your loan will be decreasing. You also need to begin saving for retirement and 5 years less would hurt you.

Income based repayment (IBR/PAYE) is meant to reduce the loan pressure in those with lower salaries to help pay off higher balance loans that they otherwise would struggle with. By deferring the bulk of the payment until the tax bomb, you have greater financial freedom to grow your career, increase your salary and live your life.

 

[1Overdrive]

Yeah, but after 5 years at a higher loan repayment, you might as well continue than restart the 20 year clock since your loan will be decreasing. You also need to begin saving for retirement and 5 years less would hurt you.

Income based repayment (IBR/PAYE) is meant to reduce the loan pressure in those with lower salaries to help pay off higher balance loans that they otherwise would struggle with. By deferring the bulk of the payment until the tax bomb, you have greater financial freedom to grow your career, increase your salary and live your life.

Thanks so much for your response. I really appreciate it. ^_^

 

[Faux]

PAYE just seems like a bandaid. And its a tragedy that paying education loans for 20 years is even a option in this country.

 

[1Overdrive]

PAYE just seems like a bandaid. And its a tragedy that paying education loans for 20 years is even a option in this country.

Yeah. Interest rates are killer. Not to mention the dental schools are doing nothing to help by upping their tuition costs to outrun the inflation rate. I'm hoping I can do PAYE just until I can find a job as a dentist, and from there transition into a shorter term payment plan.