PAYE: have to apply every year?

[deleted158872]

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I heard that you have to reapply for PAYE every year to remain on this plan. Then I wonder how people can remain on it for 20 years if they're earning doctor/dentist's salary....

I can't find any official thorough information on PAYE at all...

 

[sazerac]

What is it about a professional's salary would prevent them from paying the lesser of 10% of their discretionary income vs the 10 year repayment plan?

 

[deleted158872]

I mean, if during those 20 years, one's salary increases substantially then how can he still remain on PAYE?

 

[sazerac]

Because you have submit the requisite number of months with Qualifying Payments. A Qualifying Payment is a payment that is the minimum of either the standard 10 year repayment plan or 10% of discretionary income.

If the professional has a high enough salary, they will pay the standard 10 year loan amounts instead of the (larger) 10% of discretionary income. It is still a Qualifying Payment for the purposes of PAYE.

The only real risk of having a huge salary is that you might accidentally pay off the whole loan before forgiveness kicks in. Which isn't really a bad thing when you get right down to it.

 

[bwmd]

Yes, re-apply is a sort of misleading term. You are updating your servicer with your income information annually to calculate your payments. Once you've entered IBR or PAYE, you continue on that path. Once you no longer have a partial financial hardship, your accrued loan interest will capitalize. Your monthly payments are capped at the standard 10 year repayment rate.