IBR/consolidation

[Lisochka]

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I have spoken to my friend and she said that every year you have to apply and qualify for IBR plan. If at one point, her loan amount is less, which should happen with any loan that is being paid on, then she may not qualify for the IBR plan. Then they will transfer her from the IBR to the standard 10 year repayment plan...
It makes no sense...Everybody will be at a point, may be in 10 years, may be in 15 years, that the loan amount is small and then we wont qualify for the IBR...What is the point of IBR then?

 

[Lisochka]

I have spoken to my friend and she said that every year you have to apply and qualify for IBR plan. If at one point, her loan amount is less, which should happen with any loan that is being paid on, then she may not qualify for the IBR plan. Then they will transfer her from the IBR to the standard 10 year repayment plan...
It makes no sense...Everybody will be at a point, may be in 10 years, may be in 15 years, that the loan amount is small and then we wont qualify for the IBR...What is the point of IBR then?

Another question...Lets say min 10 years the IBR program does not exist anymore. You reapply every year for the program and now it has been eliminated, is it possible?

 

[BMBiology]

I have spoken to my friend and she said that every year you have to apply and qualify for IBR plan. If at one point, her loan amount is less, which should happen with any loan that is being paid on, then she may not qualify for the IBR plan. Then they will transfer her from the IBR to the standard 10 year repayment plan.

That's interesting. Can someone confirm this?

Nobody knows what's going to happen with IBR since it is new but one thing is certain - you will be in monthly repayment hell.

 

[CUninja]

I have spoken to my friend and she said that every year you have to apply and qualify for IBR plan. If at one point, her loan amount is less, which should happen with any loan that is being paid on, then she may not qualify for the IBR plan. Then they will transfer her from the IBR to the standard 10 year repayment plan...
It makes no sense...Everybody will be at a point, may be in 10 years, may be in 15 years, that the loan amount is small and then we wont qualify for the IBR...What is the point of IBR then?

No...think about it.

Under a standard repayment plan, you should have a fixed payment for a certain period of years. For comparison purposes, lets say this number is 1000/month. With IBR, you must have a partial financial hardship every year (not reapply...big difference) and they will adjust your payment to 10 or 15% of your disposable income. If that payment is larger than what you would pay under a standard repayment plan, then you pay the standard amount (since you no longer have a financial hardship.) Also, under IBR you qualify from the ORIGINAL amount of the loan at the time you apply.

So if you run the numbers, many of us will have a partial financial hardship, esp those with more loans (>100K.)

 

[SoylentGreen]

It depends on what you're paying. You might not even end up paying enough to cover interest, and then you would never pay the loan down and never lose IBR. You need to look at the numbers to figure it out.

 

[confettiflyer]

I have spoken to my friend and she said that every year you have to apply and qualify for IBR plan. If at one point, her loan amount is less, which should happen with any loan that is being paid on, then she may not qualify for the IBR plan. Then they will transfer her from the IBR to the standard 10 year repayment plan...
It makes no sense...Everybody will be at a point, may be in 10 years, may be in 15 years, that the loan amount is small and then we wont qualify for the IBR...What is the point of IBR then?

IBR has (almost) nothing to do with the balance of your loan. It is income based.

The real question is, what if your income rises to the point where you no longer have a financial hardship? You're "transferred" to the 10 year repayment plan because your IBR payment is now equal to a standard payment. You're technically still under IBR, because your payment is dictated by your income, but payments are capped at the 10 year rate.

There really aren't many situations where someone on IBR would magically pop into the 10 year plan without a significant gain in income.

To answer your question though, can a decreased loan balance trigger essentially a "recast" of your loan? No. See below, emphasis in bold:

You have a partial financial hardship if the monthly amount you would be required to pay on your IBReligible loans (see Q&A #6) under a Standard Repayment Plan with a 10-year repayment period (based
on the greater of the amount you owed on those loans when they initially entered repayment or the
amount you owe when you request IBR) is higher than the monthly amount you would be required to
repay under IBR.

Source: http://studentaid.ed.gov/sites/default/files/income-based-repayment-common-questions.pdf (Q4)

In summary: Your "baseline" 10-year payment is determined when you initially applied to IBR, so your friend is an idiot.

 

[confettiflyer]

That's interesting. Can someone confirm this?

Nobody knows what's going to happen with IBR since it is new but one thing is certain - you will be in monthly repayment hell.

IBR is "new" as of CCRA passage in 2007, but it is effectively a more liberal successor to ICR, which was created in 1994.

Sortof how PAYE is the even more liberal successor to IBR, instituted in 2012.

So we're about ~20 years into having income-based repayments on federal loans.

 

[xiphoid2010]

You can pop out of IBR when you go from a resident/part time to full time. My wife and I popped out when I finished my residency. Not sure its still classified as IBR or not, but they haven't requested our tax return for IBR qualificatiom so I guess we may not be any more.

 

[confettiflyer]

You can pop out of IBR when you go from a resident/part time to full time. My wife and I popped out when I finished my residency. Not sure its still classified as IBR or not, but they haven't requested our tax return for IBR qualificatiom so I guess we may not be any more.

Yeah, it's a weird spot to be in when you "pop out" of IBR. You're technically still IBR, but because your income blasted up and your payment is at the 10 year standard, it just sits there and there's no need to verify changes.

Should something happen, you can submit paperwork (loss of income) and return to IBR, but you're not really returning...you've been there all along.

This make sense? It's like leaving a hotel but not officially checking out.

 

[Lisochka]

Can I tell you guys my situation? I owe 250K and I make 58$ per hour on a 40 hour per week bases...
Would my payments be around 1K per month on IBR? Do they charge you 10% or 15% of your income? It will make a big difference to me...

 

[universalcynic]

Can I tell you guys my situation? I owe 250K and I make 58$ per hour on a 40 hour per week bases...
Would my payments be around 1K per month on IBR? Do they charge you 10% or 15% of your income? It will make a big difference to me...

Go here for info http://www.ibrinfo.org/

They even have a calculator you can use to see if you are likely to qualify and what your payment would be.

 

[BMBiology]

Can I tell you guys my situation? I owe 250K and I make 58$ per hour on a 40 hour per week bases...
Would my payments be around 1K per month on IBR? Do they charge you 10% or 15% of your income? It will make a big difference to me...

10% or 15% depends whether you qualify for "PAYE".

 

[BMBiology]

Can I tell you guys my situation? I owe 250K and I make 58$ per hour on a 40 hour per week bases...
Would my payments be around 1K per month on IBR? Do they charge you 10% or 15% of your income? It will make a big difference to me...

Assuming you don't qualify for PAYE and you owe 250k plus 6.8% interest, you will be paying $1,300 for 25 years under IBR. Please note as your salary increases, your monthly repayment will also increase. There are also other factors that would increase your monthly repayment (i.e., marrying another pharmacist who doesn't have any student loan and filing taxes together).

I think a pharmacist on this forum did a calculation and determine you need to owe 2.5x your salary for any amount to be forgiven after 25 years under IBR. Just keep in mind you will have to pay tax on the amount that is forgiven.

 

[Lisochka]

10% or 15% depends whether you qualify for "PAYE".

What is PAYE?

 

[Lisochka]

Assuming you don't qualify for PAYE and you owe 250k plus 6.8% interest, you will be paying $1,300 for 25 years under IBR. Please note as your salary increases, your monthly repayment will also increase. There are also other factors that would increase your monthly repayment (i.e., marrying another pharmacist who doesn't have any student loan and filing taxes together).

I think a pharmacist on this forum did a calculation and determine you need to owe 2.5x your salary for any amount to be forgiven after 25 years under IBR. Just keep in mind you will have to pay tax on the amount that is forgiven.

So just to make sure I understand, I will pay $1300 or whatever it is for 25 years and they wont really kick me off of IBR as long as my income or marriage situation does not change...Then after 25 years the remainder of what I owe will be forgiven, right?

 

[type b pharmD]

Yes. And the forgiven amount is only taxable to the extent of your assets at the time

 

[BMBiology]

So just to make sure I understand, I will pay $1300 or whatever it is for 25 years and they wont really kick me off of IBR as long as my income or marriage situation does not change...Then after 25 years the remainder of what I owe will be forgiven, right?

What happens when my income increases while I am in IBR?:

Because your IBR payment amount is a percentage of your income, your payments will rise as your income increases. Borrowers can now retrieve and transfer their own tax information into Electronic IBR Application, speeding up the process for determining payment levels.

If your income increases to the point where you no longer have a partial financial hardship, any unpaid interest that has accumulated would be capitalized (added to your total loan balance). You can still stay in IBR, and your payments will be capped at the 10-year standard monthly payment on the balance you owed when you first entered repayment on the loan. You will never be "kicked out" of IBR based on your income. Here's a calculator to find out what that 10-year standard payment would be.

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

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Yes, whatever is left after 25 years will be "forgiven" but it will be taxed. But as previously stated if what you owe is less than 2.5x your salary, most likely there's going to be nothing left to be forgiven

 

[Lisochka]

What happens when my income increases while I am in IBR?:

Because your IBR payment amount is a percentage of your income, your payments will rise as your income increases. Borrowers can now retrieve and transfer their own tax information into Electronic IBR Application, speeding up the process for determining payment levels.

If your income increases to the point where you no longer have a partial financial hardship, any unpaid interest that has accumulated would be capitalized (added to your total loan balance). You can still stay in IBR, and your payments will be capped at the 10-year standard monthly payment on the balance you owed when you first entered repayment on the loan. You will never be "kicked out" of IBR based on your income. Here's a calculator to find out what that 10-year standard payment would be.

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

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Yes, whatever is left after 25 years will be "forgiven" but it will be taxed. But as previously stated if what you owe is less than 2.5x your salary, most likely there's going to be nothing left to be forgiven

How does it work? Lets say my income increases so I dont qualify for the IBr anymore. Lets say it happens almost towards the end of my 25 years of repayment, lets say year 24. does it mean that they will still transfer me to direct loan and I will have to pay for tex more years? Probably I wont...It just would not make sense...

 

[confettiflyer]

This has already been answered above

 

[Lisochka]

This has already been answered above

I did not understand...You know, women and money are illogical lol
Had I understood, I would not have asked...

Looks like you understand... Would you be able to lay in simple terms?

 

[confettiflyer]

Once you're in IBR, you never leave IBR. If you make a million dollars a year, your payment will go up accordingly until it hits the "standard" 10 year repayment amount as a ceiling. Your loan balance and term don't magically get bigger or extend.

 

[BMBiology]

Once you're in IBR, you never leave IBR. If you make a million dollars a year, your payment will go up accordingly until it hits the "standard" 10 year repayment amount as a ceiling. Your loan balance and term don't magically get bigger or extend.

Confeittiflyer is right. The amount you owe doesn't change just just because you make more money. But, the longer it takes you to pay back your loan, the more interest will get compounded so you would end up paying more money in the long term.

Just financially speaking if you owe 250 k in students and makes 125 k a year, it is better to pay it off like you are in the standard 10 year repayment rather than 25 year IBR. You will end up paying less interest and less money.

 

[MindOverMatter]

Just financially speaking if you owe 250 k in students and makes 125 k a year, it is better to pay it off like you are in the standard 10 year repayment rather than 25 year IBR. You will end up paying less interest and less money.

But you'll pay ~3000/month instead of ~1200/month on IBR. The difference in total amount of payment ends up being very minimal.

 

[BMBiology]

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[BMBiology]

But you'll pay ~3000/month instead of ~1200/month on IBR. The difference in total amount of payment ends up being very minimal.

For simplicity, I entered $125,000 AGI, 6.8% interest rate, $250,000 student loan:

(1) Fixed 10 years:

*Fixed $2877 a month
*$345,240 total amount paid (including $95,240 total accrued interest)

(2) 25 year income based repayment (3% salary increase per year):

*Variable monthly payment: $1,345 for first payment; $2,670 for last payment
*$551,110 total amount paid (including $301,110 total accrued interest)
*Total forgiveness: $1039. If taxed at 28% (current rate for a pharmacist salary), owe $290 to the IRS

So total: $551,110 + 290 = $551,400

(3) 25 year income based repayment (2% salary increase per year):
*Variable monthly payment: $1353 for first payment; $2087 for last payment
*$508,936 total amount paid (including 363,478 total accrued interest)
*Total forgiveness: $104,542. If taxed at 28% (current rate for a pharmacist salary), owe $29,271 to the IRS

So total: $508,936 + 29,271 = $538,207

http://www.finaid.org/calculators/ibr.phtml

 

[xiphoid2010]

Well, the conclusion is correct but the effect of inflation tempers the differences somewhat.

A really rough estimate is to think that annual raise and inflation are both ~3% and hence cancels each other out. So what pay over 25 years is really about $1350 x360 ~$400k in current value.

To pay off in 10 years, it's fixed $2877 x 120 ~$350k. But inflation over 10 years is ~30%, so discount $350k by ~15% average to arrive at ~$300k in current value.

So the saving of paying if off in 10 years over 25 years is closer to ~$100k in todays dollar.

 

[MindOverMatter]

For simplicity, I entered $125,000 AGI, 6.8% interest rate, $250,000 student loan:

(1) Fixed 10 years:

*Fixed $2877 a month
*$345,240 total amount paid (including $95,240 total accrued interest)

(2) 25 year income based repayment (3% salary increase per year):

*Variable monthly payment: $1,345 for first payment; $2,670 for last payment
*$551,110 total amount paid (including $301,110 total accrued interest)
*Total forgiveness: $1039. If taxed at 28% (current rate for a pharmacist salary), owe $290 to the IRS

So total: $551,110 + 290 = $551,400

(3) 25 year income based repayment (2% salary increase per year):
*Variable monthly payment: $1353 for first payment; $2087 for last payment
*$508,936 total amount paid (including 363,478 total accrued interest)
*Total forgiveness: $104,542. If taxed at 28% (current rate for a pharmacist salary), owe $29,271 to the IRS

So total: $508,936 + 29,271 = $538,207

http://www.finaid.org/calculators/ibr.phtml

Great post. I neglected to account for the gradual increase in salary. However, I think you're assumptions are also neglecting a key piece of information. If a student graduates pharmacy school with 250k in debt, it would be safe to assume that the vast majority of that debt is in grad PLUS loans, which as we all know do not carry a 6.8% interest rate. I'll try to run that calculation again with ~150k of it at 8.5% and see how the numbers change.

 

[Guitarmacy]

(3) 25 year income based repayment (2% salary increase per year):
*Variable monthly payment: $1353 for first payment; $2087 for last payment
*$508,936 total amount paid (including 363,478 total accrued interest)
*Total forgiveness: $104,542. If taxed at 28% (current rate for a pharmacist salary), owe $29,271 to the IRS

So total: $508,936 + 29,271 = $538,207

http://www.finaid.org/calculators/ibr.phtml

Just wanted to point out that if loan forgiveness is taxed the same way as income, then it's not a flat 28% tax. The amount owed in this case would be ~$22,564. Now $7,000 is relatively miniscule compared to over half a million dollars, but come time to pay that tax I'm sure you'd love an extra 7 grand.

Many people I have talked to believe that if they make that extra $1 that puts them in the next tax bracket, all their money gets taxed at that percentage. Not true...

 

[BMBiology]

Just wanted to point out that if loan forgiveness is taxed the same way as income, then it's not a flat 28% tax.

I am assuming you will be working that year so it will be taxed at your current pharmacist salary? Perhaps someone can confirm this. In addition, I was only including federal tax. Some states also have state income tax.

http://www.nytimes.com/2012/12/15/y...wers-a-tax-time-bomb.html?pagewanted=all&_r=0

Great post. I neglected to account for the gradual increase in salary. However, I think you're assumptions are also neglecting a key piece of information. If a student graduates pharmacy school with 250k in debt, it would be safe to assume that the vast majority of that debt is in grad PLUS loans, which as we all know do not carry a 6.8% interest rate. I'll try to run that calculation again with ~150k of it at 8.5% and see how the numbers change.

You are right. 6.8% is for Stafford loan. 8.5% is for grad plus loan.

 

[confettiflyer]

You'll get 1099'd because forgiven loans = regular income absent a legislative exception (like with forgiven mortgage debt or PSLF). It would be taxed t your marginal rate.

I'd put my money on a legislative fix when people start hitting the forgiveness mark...student loans are the new "too big to fail" and people/corporations will argue the debts are a drag on the broader economy.

There are provisions about insolvency with taxes but I won't dive into that here.

 

[BMBiology]

^^ not when the public read stories like this, "deadbeat doctors, dentists stick taxpayers with student loan bills".

http://www.theindychannel.com/news/...tists-stick-taxpayers-with-student-loan-bills

 

[confettiflyer]

^^ not when the public read stories like this, "deadbeat doctors, dentists stick taxpayers with student loan bills".

http://www.theindychannel.com/news/...tists-stick-taxpayers-with-student-loan-bills

930 doctors...out of how many?

non-issue.

 

[All4MyDaughter]

930 doctors...out of how many?

non-issue.

And from a defunct program that hasn't loaned money in over a decade. 😴

 

[BMBiology]

930 doctors...out of how many?

non-issue.

I don't think the public know or care. All they care is the $116 million these deadbeats owe. I think it is wishful thinking to believe there will be a public outcry to forgive loans owe by healthcare professionals who make a 6 digit salary and who can actually afford to pay back their student loans. An unemployed artist? Maybe but not physicians, dentists, pharmacists.

 

[confettiflyer]

I don't think the public know or care. All they care is the $116 million these deadbeats owe. I think it is wishful thinking to believe there will be a public outcry to forgive loans owe by healthcare professionals who make a 6 digit salary and who can actually afford to pay back their student loans. An unemployed artist? Maybe but not physicians, dentists, pharmacists.

it'll be like how attorneys are viewed

"all attorneys are horrid blood sucking people...except mine."

Same will go for HCP's...they will be seen as overworked selfless individuals who deserve a break, especially because their own doctors/dentists are so awesome.

I don't think your argument will stick with the public...besides, something minor like this doesn't result in legislation. We needed >20 murdered children to even START the conversation about gun control with no legislative end in sight right now.

Murder. You're talking about a minuscule amount of money. I reiterate this is a non-issue reported on by some no-name news site in fly-over country.

But in terms of supporting loan forgiveness, you'll get entities like the AMA arguing that there are no primary care docs and we need more gov't subsidies (like loan forgiveness) or else you'll be waiting in lines for care. That argument will stick.

 

[owlegrad]

But in terms of supporting loan forgiveness, you'll get entities like the AMA arguing that there are no primary care docs and we need more gov't subsidies (like loan forgiveness) or else you'll be waiting in lines for care. That argument will stick.

Yup, I agree with this logic.

 

[confettiflyer]

Oh BMB, you need to dream bigger:

You found 930 HCP's who owe the gov't $116M?

Here's 91 HCP's who defrauded $430M from the gov't.

http://www.nytimes.com/2012/10/05/business/medicare-fraud-charged-against-91.html?_r=0

THERE is your public outcry, haha.

 

[BMBiology]

Same will go for HCP's...they will be seen as overworked selfless individuals who deserve a break, especially because their own doctors/dentists are so awesome.

Yes, a pharmacist needs a break. A radiologist who makes $400,000 a year also deserves a break in life. Is that why the public treat pharmacists so well? They really symphasize with our daily struggle to put feed our children. 🙄

More wishful thinking.

 

[confettiflyer]

Yes, a pharmacist needs a break. A radiologist who makes $400,000 a year also deserves a break in life. Is that why the public treat pharmacists so well? They really symphasize with our daily struggle to put feed our children. 🙄

More wishful thinking.

It's not wishful...anecdotally most people understand HCP's make $$$ but realize they spent the better part of a decade+ to get there.

You're ignoring the debt component. $400k a year is a lot of money yes, but put in the context of "it took 12 years and $600k in debt to get there" it's really fair compensation. It's not like HCP's turned 18 and started rolling in dough debt free.

If you're arguing public opinion I think you're one of the few that are outraged, most people understand the above.

 

[BMBiology]

It's not wishful...anecdotally most people understand HCP's make $$$ but realize they spent the better part of a decade+ to get there .

Really? The public knows pharmacists now need to get a doctorate degree?

 

[confettiflyer]

Really? The public knows pharmacists now need to get a doctorate degree?

i think people still think we count pills, but it's irrelevant because legislatively we would be lumped in with other HCP's.

aaaand here's my data contradicting your statement of fact:

Source: CBS News/New York Times National Survey, March #1, 2011 (ICPSR 33487)
http://www.icpsr.umich.edu/icpsrweb/ICPSR/studies/33487

This is a change from the 1985 AJPH study that found 70% thought doctors were overpaid.

So public opinion on HCP compensation is heading in the opposite direction based on these two validated studies/surveys. You are free to post data supporting your position if you wish to continue the debate.

 

[BMBiology]

Only 9% think doctors don't make enough in your data.

I think this is wishful thinking from someone who owes 275 k in student debt. Get back to me in 10 years

 

[All4MyDaughter]

Only 9% think doctors don't make enough in your data.

I think this is wishful thinking from someone who owes 275 k in student debt. Get back to me in 10 years

When you're losing the debate, a well-timed insult is always the way to go! Solid. 👍

 

[BMBiology]

When you're losing the debate, a well-timed insult is always the way to go! Solid. 👍

It is only an insult if you think owning that much money is unreasonable for a pharmacist

 

[All4MyDaughter]

It is only an insult if you think owning that much money is unreasonable for a pharmacist

You have made it abundantly clear how you feel about that level of debt for a PharmD. Which is how I know you meant it as an insult.

Also, assuming you meant owe, not own. Funny how those pesky words have completely different meanings.

 

[BMBiology]

You have made it abundantly clear how you feel about that level of debt for a PharmD. Which is how I know you meant it as an insult.

Also, assuming you meant owe, not own. Funny how those pesky words have completely different meanings.

Stop trying to insult me when I am typing with my iPhone

 

[BMBiology]

You have made it abundantly clear how you feel about that level of debt for a PharmD., which is how I know you meant it as an insult.

I corrected your sentence. I hope you don't mind.

 

[confettiflyer]

my god are you that bad at interpreting data? holy cow. debt or no debt, a fool and his money are soon parted.

(Breaking character: I do consistently lie on these boards for the sake of argument, you know this right?)

 

[All4MyDaughter]

I corrected your sentence. I hope you don't mind.

Sure, whatever. At least I don't make errors that completely change the meaning of what I am trying to say...

 

[All4MyDaughter]

Stop trying to insult me when I am typing with my iPhone

Sweetie, owe and own mean completely different things. Pointing that out isn't insulting you. It's helping! 🙂