IBR, PAYE etc.

[catnips]

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Hi everyone!
As I am making a list of schools to apply, I feel like I keep posting here. But thanks for all your help!

I wasn't going to apply any OOS, but Cornell being my instate, and having a not-so-great GPA (3.5ish, but I have an F from freshman year bio, and for the schools that count that in (Cornell does), it significantly lowers every gpa), I figured I can't be too picky.

However, without jumping into anything, I want to make sure that I know more about how to pay back the loans because my family is freaking out. I checked the website, and it seems not that hard to qualify for IBR and PAYE. Does anyone know of any situation where a person tried to do this but was not eligible? How hard is it to be eligible for these? Is anyone pretty much eligible?

I read in one other forum that we can take up to 40,000 from federal loans, and assuming all of this $40,000 a year qualify for IBR and PAYE, it doesn't seem that bad.
I really want to apply to Oklahoma State, Western and perhaps Tuskegee. Their tuition doesn't seem bad if I can do IBR and PAYE.

I really don't want to do private loans because I became a U.S. resident recently, and because of that I don't have a good credit score yet. So the interest would be crazy high 🙁 My husband will most likely cover my living expenses as long as he can work, so given those, would you suggest I apply OOS?

Thanks for all your input!

 

[allygator13]

I don't know much about the IBR and PAYE yet, but don't forget to factor in the interest that will begin accumulating on those loans the second you take them out that won't start being paid off until you graduate and start working.

 

[kittyy]

With IBR and PAYE I know it says you are "excused" after 25 years, but really you are taxed on the remainder of the loans. A lot of times with IBR and PAYE the amount your paying might not even cover the interest that is accumulating (depending how much you're making), so in the end your loan amount will be around the same, or greater than where it started, and you'll be taxed on it.

Does anyone know what % those taxes are?

 

[MassDVMMPH]

Does anyone know what % those taxes are?

It will depend on what the income tax rate is at the time - it will be taxed as income for that year.

 

[MassDVMMPH]

Of course, there's also the possibility that a law will be passed that eliminates that final tax. Some lawmakers are trying to go in that direction, but I wouldn't count on that.

 

[wildcatj]

Not that I'd suggest taking out more debt than you absolutely have to, but if you need to use IBR/PAYE I would suggest calculating what you need to put aside every month to be able to cover that taxation at the end. It may end up being more than the fixed payment for 25 years between what you have to save for taxes and what you pay every month. Then, if they do change it so you don't have to pay taxes at the end, you just end up with a nice nest egg for yourself.
I would probably estimate 35% myself to be safe.

 

[deleted498041]

With IBR and PAYE I know it says you are "excused" after 25 years, but really you are taxed on the remainder of the loans. A lot of times with IBR and PAYE the amount your paying might not even cover the interest that is accumulating (depending how much you're making), so in the end your loan amount will be around the same, or greater than where it started, and you'll be taxed on it.

Does anyone know what % those taxes are?

It'll be income tax, whatever that is at that point in time. Last time I ran the numbers, I assumed about $30,000 in the end, and that is payed as a lump sum. Can't make payments on that! There is current legislation trying to be passed that would eliminate that final taxed amount so you would just pay whatever they calculate your monthly payment to be and then that's it for 25 years.
Keep in mind that pairing IBR/PAYE with PSLF is a good idea too... Although, who knows how useful PSLF will be for us in the future.

 

[TooLove]

It'll be income tax, whatever that is at that point in time. Last time I ran the numbers, I assumed about $30,000 in the end, and that is payed as a lump sum. Can't make payments on that! There is current legislation trying to be passed that would eliminate that final taxed amount so you would just pay whatever they calculate your monthly payment to be and then that's it for 25 years.
Keep in mind that pairing IBR/PAYE with PSLF is a good idea too... Although, who knows how useful PSLF will be for us in the future.

The current legislation that would waive the tax on forgiven loan amounts would also render PSLF basically pointless for most of us (it would be capped at somewhere around $50,000) if it goes through.

 

[dovelover]

I read in one other forum that we can take up to 40,000 from federal loans, and assuming all of this $40,000 a year qualify for IBR and PAYE, it doesn't seem that bad.

You can actually get more than $40,000 in federal loans. You can get up to about $40,000 in direct unsubsidized loans, which are the lower (relatively speaking) interest rate loans, then you can cover any remaining amount in grad plus loans (which do have a higher interest rate). So you can finance it all with federal loans of some sort or another. And they both qualify for the IBR/PAYE programs.

 

[catnips]

Thank you so much for all the replies and input! I learn a lot in this forum really. I knew we had to pay the taxation at the end, I didn't run the numbers to see how much would it be though, so I assumed it wouldn't be so bad - because I thought we could pay that in monthly payments afterwards. Since it'll be a huge lump, it makes sense to just save for it. Sounds like 35% of all that accumulated on interest loans would be a lot though... Sigh, I ran both 10 year and 25 year scenario without IBR or PAYE and it looked horrible, so hopefully IBR/PAYE might still be better.

I hope that legislation passes, I should follow it more closely. I thought about PSLF especially since I would very much like to work in a nonprofit shelter, and am fascinated by shelter medicine but my understanding is those jobs are so scarce... So I didn't want to rely on getting a public service job even though that's the direction I want to go for.

Dovelover thank u so much for that info, I must've understood it wrong! That is a relief... 🙂 I really didn't want to deal with private banks lol

Thank you all soooo much. I have no one else to ask these lol 🙂

 

[TooLove]

You can actually get more than $40,000 in federal loans. You can get up to about $40,000 in direct unsubsidized loans, which are the lower (relatively speaking) interest rate loans, then you can cover any remaining amount in grad plus loans (which do have a higher interest rate).

Just to clarify, for those of us attending school in the Great White North, we're only eligible for $20,500 in direct unsubsidized loans and the rest needs to come from the GradPLUS loans at the higher interest rate. I'm not sure why the discrepancy, there's nothing that says we shouldn't get the standard $40,500 in the fine print and neither the school or the government has been able to give a reason why.

 

[wildcatj]

Another comment regarding PAYE/IBR, remember that you may never even TOUCH your principal debt. All the loan payments you make may just be toward interest, and it might not even cover that. So remember that even if you only took out 200k, you may end up having to pay taxes on a lot more. Which is really sad that it never even gets smaller.

 

[deleted498041]

The current legislation that would waive the tax on forgiven loan amounts would also render PSLF basically pointless for most of us (it would be capped at somewhere around $50,000) if it goes through.

Yup! That's what I meant when I said that we don't know how useful it'll be for us in the future. It'll be a shame if that bill passes.

 

[TooLove]

Yup! That's what I meant when I said that we don't know how useful it'll be for us in the future. It'll be a shame if that bill passes.

It would certainly be a shame for the areas that depend on that incentive program for veterinary care, but honestly I think for the vast majority of us it would be more beneficial to not have to cough up tens of thousands of dollars at the end of our loan repayment.

 

[deleted498041]

It would certainly be a shame for the areas that depend on that incentive program for veterinary care, but honestly I think for the vast majority of us it would be more beneficial to not have to cough up tens of thousands of dollars at the end of our loan repayment.

Oh, I totally read your other post incorrectly. There's a bill that is restricting PSLF to 50-some-thousand and then there's a bill that would get rid of the giant payoff at the end of IBR/PAYE. I thought these were two different bills; am I wrong?

 

[wildcatj]

Oh, I totally read your other post incorrectly. There's a bill that is restricting PSLF to 50-some-thousand and then there's a bill that would get rid of the giant payoff at the end of IBR/PAYE. I thought these were two different bills; am I wrong?

They are currently included in the same bill.

 

[deleted498041]

They are currently included in the same bill.

Oh poop. I didn't know that. Well, I guess my opinion on the bill has been changed!

 

[KCgophervet]

I would read over the "estimated costs of vet school" thread. Also, this calculator is super helpful.

 

[Minnerbelle]

Oh poop. I didn't know that. Well, I guess my opinion on the bill has been changed!

I would sit and reflect on the trend of how the gov't has been handling things at their convenience though. The PSLF was created when Student loans were getting out of hand, and it seemed to me like a convenient bandaid to prevent a disaster of having a ton of students default on their loans. It made it so that students with no other options could go "oh, well I guess I'll just work for a nonprofit and all my loans would go away and I can live comfortably because the IBR payment is so little." But with this little scheme, the gov't which is already in a debt crisis itself wouldn't have to really pay anything for 10 years! It would give them 10 years to come up with another plan. And now that we're almost at that magical 10 year point where the government would actually have to lose money on PSLF (money they don't have), they want to change it! Who cares if these people relying on it are screwed over. Actually they do care. They don't want the outcry and issues that would result from these people being screwed over. So what does the government propose? Tell these same people who had just been screwed over, that in another 10 to 15 years, they'll be off the hook. Poof, any astronomical debt they've accumulated from never paying the principal from their low payments will be gone... again in 10-15 years. At this point is it wise to trust that they won't change things when they get to that 10-15 year mark when they go "holy motherf******! We're going to actually lose out on a ton of income stream by 'forgiving' all this student debt!"? I dunno, as much as I would like to believe they will honor it, I wouldn't feel comfortable making life decisions on it.

Remember the government even cut out subsidized loans without any forewarning (which only amounted to the gov't paying just the interest amount for upto only $8500/yr of principal per student) presumably due to lack of funds. The amount of money the gov't was losing by having subsidized loans in place is peanuts in comparison to what they will lose with PSLF or eliminating taxation on the forgiven amount after 20-25 yrs on PAYE or IBR

 

[deleted498041]

I would sit and reflect on the trend of how the gov't has been handling things at their convenience though. The PSLF was created when Student loans were getting out of hand, and it seemed to me like a convenient bandaid to prevent a disaster of having a ton of students default on their loans. It made it so that students with no other options could go "oh, well I guess I'll just work for a nonprofit and all my loans would go away and I can live comfortably because the IBR payment is so little." But with this little scheme, the gov't which is already in a debt crisis itself wouldn't have to really pay anything for 10 years! It would give them 10 years to come up with another plan. And now that we're almost at that magical 10 year point where the government would actually have to lose money on PSLF (money they don't have), they want to change it! Who cares if these people relying on it are screwed over. Actually they do care. They don't want the outcry and issues that would result from these people being screwed over. So what does the government propose? Tell these same people who had just been screwed over, that in another 10 to 15 years, they'll be off the hook. Poof, any astronomical debt they've accumulated from never paying the principal from their low payments will be gone... again in 10-15 years. At this point is it wise to trust that they won't change things when they get to that 10-15 year mark when they go "holy motherf******! We're going to actually lose out on a ton of income stream by 'forgiving' all this student debt!"? I dunno, as much as I would like to believe they will honor it, I wouldn't feel comfortable making life decisions on it.

Remember the government even cut out subsidized loans without any forewarning (which only amounted to the gov't paying just the interest amount for upto only $8500/yr of principal per student) presumably due to lack of funds. The amount of money the gov't was losing by having subsidized loans in place is peanuts in comparison to what they will lose with PSLF or eliminating taxation on the forgiven amount after 20-25 yrs on PAYE or IBR

Yeah, this is exactly what I've been talking to my parents and boyfriend about. My tuition is pretty damn high, and it's going up next year and it's kind of alarming to me how little I can actually lower my loan debt over the next few years. I planned out taking out a lot my first year, because I'd never lived on my own, and then dramatically cutting it down over the next three but after consulting the budgets I've made and how much I've actually spent... I can't reduce it by nearly as much as I thought I could, even if I eat Ramen every day for every meal.
It's really unfortunate that all of these plans can just kind of poof and the government will face very little repercussions as a result, whereas we'll be up the creek without a paddle. A doctor I worked for said, with IBR, her loan payments are $0 for this year -- since it's her first year out of vet school. She plans on paying nothing, since she doesn't have to. That's something that I, personally, can't bank on because, as you said, I could get to the end of my repayment plan and then they decide the final amount isn't forgiven.
I would be really disappointed at the loss of PSLF. I planned on applying for internships, and subsequently residencies, at an academic institution that would qualify me for PSLF. I'd already be spending 3-5 years there, so I figured I might as well apply for a job afterwards and make it the 10 years. Now, maybe not such a good idea since my heart isn't in academia anyway.
At this point in time, it almost seems like we just have to take it day-by-day and while we may apply for any number of repayment programs, we shouldn't be comfortable in assuming that any amount of money will be forgiven at any time.

 

[catnips]

Omg the thought of govt changing the IBR, PSLF just like that... Sigh, I thought IBR sounded too good to be true. (Not as good as students in other countries getting a free education but... oh well won't even go there) and I guess it is. I would hate to rely on a governmental program and to see that they change it and you're stuck. The best thing sounds like to try it pay it off whenever and as much as you can I guess. And then like Rwwilliams said take it day by day and apply to whatever govt has to offer.
Or if my instate would be so kind to accept me... 🤣 (Not that that's cheap either)
Again, thanks everyone for the input and info!