Important loan info

[aequitasveritas]

Advertisement - Members don't see this ad

1. Current IBR: 15% of the difference between your AGI and 150% of the poverty level income for your size family and location.

Under the new plan coming in a month, they are reducing the payment to 10%. However, if it is a flat 10%, rather than the difference score from above, you might be better served using a current consolidation. You will have a choice between the two systems.
If you use the current plan your cannot modify to the 10% plan. You're stuck.


After 3 yrs of no interest payments under IBR, your monthly payments must meet or exceed the interest on your loans. If they do not, it capitalizes. This dispells the myth that people get off with IBR payments. What is (6.8% * 200,000)/12? That's what you must pay monthly after 3 yrs.

2. Also, Perkins loans and HEAL are not eligible for the new plan.

3. When you consolidate, make sure all your loans are listed as graduated or they will not include them, and they won't tell you either. A lengthy modification process will ensue. You must add loans within 60 days.

4. Although they ask for the payment plan you'd prefer, you also must submit this to the Direct Loan Payment Department. You also have 60 days from consolidation to decide.

 

[Therapist4Chnge]

Thanks!

For those interested, there are financial planners that specialize in helping professional students (med, law, etc) with their finances. It can cost a few hundred dollars (or more), but a top-notch financial planner is worth their weight in gold (prior to the recent spike. 😀 ).

 

[sydb1367]

Under the new plan coming in a month, they are reducing the payment to 10%. However, if it is a flat 10%, rather than the difference score from above, you might be better served using a current consolidation. You will have a choice between the two systems.
If you use the current plan your cannot modify to the 10% plan. You're stuck.

from what I've read, it is 10% of discretionary income not flat 10%. however:
“[The changes] are only going to apply to people who borrowed their first federal student loans in 2008 or later and if you are also borrowing federal student loans in 2012,” she says. “For people who started borrowing before 2008 are not going to qualify, but people who took their first loan in 2008 and took another loan in 2012 will qualify.”

from: http://www.foxbusiness.com/personal...nt-loan-plan-who-qualifies-and-how-to-enroll/

After 3 yrs of no interest payments under IBR, your monthly payments must meet or exceed the interest on your loans. If they do not, it capitalizes. This dispells the myth that people get off with IBR payments. What is (6.8% * 200,000)/12? That's what you must pay monthly after 3 yrs.

I've seen where it says that they cover your interest for the first 3 years, but nothing about minimum payments having to exceed your interest after that. or are you saying that you *must* pay 6.8%*200k/12, not because of a repayment plan requirement, but to prevent capitalizing the interest? yes it capitalizes, but if it's forgiven after 25 years you probably would never pay that capitalized interest anyways.

"In some situations, your reduced payment under IBR may not cover the interest on your loans. If so, the government will pay that interest on your Subsidized Stafford Loans for your first three years in IBR. After three years and for other loan types, the interest will be added to the total amount you owe. While your debt may grow if your affordable payments are low enough, anything you still owe after 25 years of qualifying payments will be forgiven."

from: http://ibrinfo.org/what.vp.html

 

[serendipity2]

from what I've read, it is 10% of discretionary income not flat 10%. however:
“[The changes] are only going to apply to people who borrowed their first federal student loans in 2008 or later and if you are also borrowing federal student loans in 2012,” she says. “For people who started borrowing before 2008 are not going to qualify, but people who took their first loan in 2008 and took another loan in 2012 will qualify.”

from: http://www.foxbusiness.com/personal...nt-loan-plan-who-qualifies-and-how-to-enroll/




I've seen where it says that they cover your interest for the first 3 years, but nothing about minimum payments having to exceed your interest after that. or are you saying that you *must* pay 6.8%*200k/12, not because of a repayment plan requirement, but to prevent capitalizing the interest? yes it capitalizes, but if it's forgiven after 25 years you probably would never pay that capitalized interest anyways.

"In some situations, your reduced payment under IBR may not cover the interest on your loans. If so, the government will pay that interest on your Subsidized Stafford Loans for your first three years in IBR. After three years and for other loan types, the interest will be added to the total amount you owe. While your debt may grow if your affordable payments are low enough, anything you still owe after 25 years of qualifying payments will be forgiven."

from: http://ibrinfo.org/what.vp.html

From what I had read, I understood it to be what you are saying here sydb re: if your payments don't cover interest, it just capitalizes.

Any suggestions on how to go about finding one of these financial planners? I am most concerned about whether I will actually get married in the eyes of the law, as it seems to double my potential payments after graduation. My significant other has zero student loan debt, but if we get married (or is it just if we file jointly?) it would seem to then take both of our income into account and potentally double my monthly payments. We are considering not getting married if this is truly the case. Over the life of my loan, this could add up to a lot of money. Any thoughts?

 

[Therapist4Chnge]

Any suggestions on how to go about finding one of these financial planners?

The residents in my dept. all attended a presentation about managing finances (I believe put on as part of their residency training), and I found out about it from them. There seems to be one or two people who handle most of the residents I know. I'm sure there are similar people around other med school programs/hospitals where there is a large concentration of people in 6-figures of debt. It's not a bad gig for them, as they'll get in with people now, and hopefully they'll do well and their portfolio will grow.

 

[aequitasveritas]

I've seen where it says that they cover your interest for the first 3 years, but nothing about minimum payments having to exceed your interest after that. or are you saying that you *must* pay 6.8%*200k/12, not because of a repayment plan requirement, but to prevent capitalizing the interest? yes it capitalizes, but if it's forgiven after 25 years you probably would never pay that capitalized interest anyways.

"In some situations, your reduced payment under IBR may not cover the interest on your loans. If so, the government will pay that interest on your Subsidized Stafford Loans for your first three years in IBR. After three years and for other loan types, the interest will be added to the total amount you owe. While your debt may grow if your affordable payments are low enough, anything you still owe after 25 years of qualifying payments will be forgiven."

from: http://ibrinfo.org/what.vp.html

Yes, that is true, if you always qualify for IBR. If your income rises above the ratio of income/loans then you can only switch to the Standard Repayment. And, if that happened you would be paying a higher amount because it would be a interest generated payment of your new, capitalized principle.

So b poor or b payin

 

[sydb1367]

higher amount than what?
You always pay the least of the two plans. i.e. if your income goes up so much that your IBR calculated payment would be more than your payment under the standard payment plan, "you will be required to pay the amount you would have been required to pay under a 10-year Standard Repayment based on the amount of your eligible loans that were outstanding when you began repaying under IBR."

from: http://studentaid.ed.gov/students/attachments/siteresources/IBRQ&A_template_123109_FINAL.pdf

so, no, it doesn't include the capitalized principle.

btw, based on your example of 200k in loans, you need an AGI >200k (for a single person family) to NOT qualify for IBR.

 

[aequitasveritas]

higher amount than what?
You always pay the least of the two plans. i.e. if your income goes up so much that your IBR calculated payment would be more than your payment under the standard payment plan, "you will be required to pay the amount you would have been required to pay under a 10-year Standard Repayment based on the amount of your eligible loans that were outstanding when you began repaying under IBR."

Per the 200k example. You'd be paying 1666.67 a month under a 10 yr repayment if you had qualifying income.

from: http://studentaid.ed.gov/students/attachments/siteresources/IBRQ&A_template_123109_FINAL.pdf

so, no, it doesn't include the capitalized principle.

btw, based on your example of 200k in loans, you need an AGI >200k (for a single person family) to NOT qualify for IBR.

This is good to know. I've had a hard time getting solid answers from Direct Loan. Often the people you speak with state different facts than the website.

 

[sydb1367]

actually I get a whopping $2301.61 as a monthly payment on 200k at 6.8% for 10 years.
from: http://www.direct.ed.gov/calc.html

now, depending on your work setting (e.g. private practice, which you'd kinda hafta be doing to get an AGI of 200k) and how tax savvy you are, an adjusted gross income of 200k could reasonably translate into a net of 12k a month (before the 2300 dollar student loan payment).

 

[audchik]

This is a question that will surely display my ignorance on this topic, but if you start this plan and do the IBR, can they change the rules at some point (and then everyone's screwed)? Or would it only affect new borrowers and the rest of us are still safe?

 

[aequitasveritas]

This is a question that will surely display my ignorance on this topic, but if you start this plan and do the IBR, can they change the rules at some point (and then everyone's screwed)? Or would it only affect new borrowers and the rest of us are still safe?

No. You will have entered a contract and they are bound as well. You might want to check for any exit-clauses that may exist, as that may be a parlance for loan modification on their end. But, no, in general they cant change the rules.

 

[serendipity2]

Thanks for the info folks!

 

[audchik]

No. You will have entered a contract and they are bound as well. You might want to check for any exit-clauses that may exist, as that may be a parlance for loan modification on their end. But, no, in general they cant change the rules.

Great, thanks.

 

[aagman01]

I would caution on purely accepting such an assumption (e.g. once your in, your in for IBR). American Airline workers will likely be losing portions of their promised pensions, for example, because of their recently announced "bankruptcy". Likewise, it seems all we are hearing about are cuts in social security. Often, from what I have heard, such cuts, if they occur, would involve adults already paying into the system (though not retirees). The Loan Forgiveness Program, for example, sounds great (work at a government or not-for-profit for 10 years, your loans are forgiven). However, that still has to be funded by Congress. As we have seen with other federal legislation (e.g. No Child Left Behind), the government can be quite good at passing popular laws without funding follow through. We'll see........

No. You will have entered a contract and they are bound as well. You might want to check for any exit-clauses that may exist, as that may be a parlance for loan modification on their end. But, no, in general they cant change the rules.

 

[aequitasveritas]

I would caution on purely accepting such an assumption (e.g. once your in, your in for IBR). American Airline workers will likely be losing portions of their promised pensions, for example, because of their recently announced "bankruptcy". Likewise, it seems all we are hearing about are cuts in social security. Often, from what I have heard, such cuts, if they occur, would involve adults already paying into the system (though not retirees). The Loan Forgiveness Program, for example, sounds great (work at a government or not-for-profit for 10 years, your loans are forgiven). However, that still has to be funded by Congress. As we have seen with other federal legislation (e.g. No Child Left Behind), the government can be quite good at passing popular laws without funding follow through. We'll see........

I agree- that we shouldn't trust anything as indelible. Yet we also shouldn't let caution drift into paranoia.

The issue of American Airlines is not similar to federally insured student loans. The only way to lose the student loan benefits is if the government/federal reserve disbands. It has nothing to do with funding. The government does not fund student loan repayments, they fund student loans given out to borrowers. Congress cannot retroactively defund an IBR that prior students contracted into. There is no precedent in U.S. history where such an action has occurred. There would be a multi-million student class action suite. Federal and Supreme judges would block it, and it would never actualize.

You are right on one issue though. There is no guarantee that the community clinics will continue to receive funding for loan forgiveness. So that is not a sure thing.

 

[Therapist4Chnge]

Congress cannot retroactively defund an IBR that prior students contracted into. There is no precedent in U.S. history where such an action has occurred. There would be a multi-million student class action suite.

There was no precedent for the legislation that led to The Patriot Act, yet Congress found a way to jam that through. They can fund/defund whatever they fancy, as they can change the laws and then it is a much harder fight to get overturned. There was an entire war started without a proper declaration of war or vote by Congress. We are all just along for the ride when it comes to what gov't can and can't do.

*puts on his tin foil hat*

Federal and Supreme judges would block it, and it would never actualize.

While this could be true, the Supreme Court can only rule on a law, so the action could still be written into law. Once something is written in to law, getting it back out can be a long and drawn out process. I personally don't trust our third branch of gov't to always fix the mistakes of the other two branches.

 

[aequitasveritas]

There was no precedent for the legislation that led to The Patriot Act, yet Congress found a way to jam that through. They can fund/defund whatever they fancy, as they can change the laws and then it is a much harder fight to get overturned. There was an entire war started without a proper declaration of war or vote by Congress. We are all just along for the ride when it comes to what gov't can and can't do.

I agree that we shouldn't trust govnt per se. Yet this is really a non-issue. The govnmt would not be "funding" previously entered IBR. They could end it for the upcoming graduates of course. But, the money for previously entered IBR contracts to students has already been acquired and spent with deficit spending (not s.t. I agree with, but it is what it is).

*puts on his tin foil hat*

..chuckle