IBR/PAYE: When to apply?

[cher25]

I will be graduating in May and would like to apply for IBR or PAYE (if I qualify). I have undergraduate/grad school debts exceeding 100K (prior to 2007) as well as med school debt. I called Navient (formerly Sallie Mae) today to try to figure out when I'll go into repayment and when to file for IBR. Either the person I spoke with was not very knowledgeable or I'm just totally confused. She said that some of my debts will go into immediate repayment while others would be deferred for 6 months. She discouraged me from applying for IBR/PAYE prior to June. But then she mentioned that it takes 25+ days to process. My standard repayment would be about $2600+ monthly. I am in no way prepared to risk making even 1 payment of this as I will be depleting quite a bit of liquid relocating for residency.

To anyone who's applied for IBR/PAYE, when would be the best time to submit an application? Would submitting one now be premature?

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[bwmd]

I wonder what loans she thought didn't have a six month grace period? All the ones eligible for IBR that I know of have a grace unless you consolidate. You could easily apply in August or September after a May graduation and have no problems. I personally did so in August, began repayment in November.

For what it's worth, you can always forbear when needed to very quickly, so no matter what no one should really ever have to make a standard repayment in residency they otherwise aren't ready for.

 

[DrMidlife]

sounds like there are some private loans in this story. there are huge differences between federal and private loans. private loans aren't eligible for any of the PAYE/IBR/PSLF plans. private loans don't have to offer deferment after graduation. you can't consolidate private loans with federal loans in pursuit of a federal repayment plan.

we med students can barely figure this out, and the person answering the phone at Navient probably has just as hard a time.

 

[cher25]

I wonder what loans she thought didn't have a six month grace period? All the ones eligible for IBR that I know of have a grace unless you consolidate. You could easily apply in August or September after a May graduation and have no problems. I personally did so in August, began repayment in November.

For what it's worth, you can always forbear when needed to very quickly, so no matter what no one should really ever have to make a standard repayment in residency they otherwise aren't ready for.

I consolidated my undergraduate FFELP loans back then so that it would qualify for PSLF. Since I worked a while prior to attending med school, I'm guessing my grace may have been exhausted. Thank you for that information about applying in August and the suggestion to forbear. This is reassuring.

 

[cher25]

sounds like there are some private loans in this story. there are huge differences between federal and private loans. private loans aren't eligible for any of the PAYE/IBR/PSLF plans. private loans don't have to offer deferment after graduation. you can't consolidate private loans with federal loans in pursuit of a federal repayment plan.

we med students can barely figure this out, and the person answering the phone at Navient probably has just as hard a time.

I have no private loans, but I did consolidate my undergrad loans. It's all so confusing now that the cumulative debt and repayment are slapping me in the face.

 

[bwmd]

I have no private loans, but I did consolidate my undergrad loans. It's all so confusing now that the cumulative debt and repayment are slapping me in the face.

Since you already have one loan that's exhausted grace, you could also reconsolidate everything again since you have additional loans. You'd then apply for IBR as soon as the loans are consolidated. The main benefit of this would be if you were hoping to one day apply for PSLF, as the more qualifying payments you make at lower income levels, then more money would eventually be forgiven. Depending on your federal loan servicer, you may also be able to weasel $0 IBR/PAYE as you earn payments for your first year due to your nonexistent or minimal student income. This was routinely done a few years ago, but most servicers have caught on and require your alternative documentation of income (pay stub/equivalent) to confirm your true income (info described in this post; if you don't want to qualify for PSLF, there are also now private consolidation options that may work for you.).

 

[cher25]

Since you already have one loan that's exhausted grace, you could also reconsolidate everything again since you have additional loans. You'd then apply for IBR as soon as the loans are consolidated. The main benefit of this would be if you were hoping to one day apply for PSLF, as the more qualifying payments you make at lower income levels, then more money would eventually be forgiven. Depending on your federal loan servicer, you may also be able to weasel $0 IBR/PAYE as you earn payments for your first year due to your nonexistent or minimal student income. This was routinely done a few years ago, but most servicers have caught on and require your alternative documentation of income (pay stub/equivalent) to confirm your true income (info described in this post; if you don't want to qualify for PSLF, there are also now private consolidation options that may work for you.).

Thank you for your suggestions. I'm hesitant to reconsolidate because my undergrad/grad school loans (excess of 100k) are consolidated at 4% whereas my med school loans (excess of 150k) are at 6.8%. I will do as you previously advised and do a forbearance should they expect a standard repayment before my PAYE/IBR is processed.