DocWinter

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Long story short, my tax accountant messed up my tax documents and mine and my wife’s taxes are now going to be married filing jointly. We had been on the pay program and had a very reasonable rate last year as only my income counted as we filed separately. Now it is going to be much higher as it shows both our incomes as discretionary income. My resident salary is approximately 55K per year and my wife makes approximately 40 K. My question is, is it worth switching over to repaye or sticking with paye for one year? Does anyone have experience with either switching or know the short or long-term benefits of doing so?
 

RangerBob

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Your payment will be the same with REPAYE, as it takes your wife's income into account (it'll also take her loans into account as well, so your total family payment is 10% of your combined AGI). You do get an interest subsidy with REPAYE, but if you have a lot of interest that will capitalize and won't be doing REPAYE for long, it may not be worth it. It really depends on how much interest you have accumulated, how long you plan to stick with the new plan, how long you'll be on that new plan if you plan to switch/consolidate (such as with a private consolidation loan when you become an attending).

I switched from IBR to REPAYE when it first became available, after 2 or 3 years of payments in IBR. I had a lot of interest capitalize. But I did the math, and taking into account another two years of residency/fellowship, the interest subsidy of REPAYE ended up more than making up for the capitalized interest in my case.

I think it's pretty rare to actually come out ahead by filing separately unless your spouse is making a lot of money and doesn't owe much (ie, you're a resident with large loans, spouse is an attending with no loans)--you lose so many tax benefits. It may be worthwhile to do a thorough calculation if you haven't done one already.
 
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DocWinter

DocWinter

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Your payment will be the same with REPAYE, as it takes your wife's income into account (it'll also take her loans into account as well, so your total family payment is 10% of your combined AGI). You do get an interest subsidy with REPAYE, but if you have a lot of interest that will capitalize and won't be doing REPAYE for long, it may not be worth it. It really depends on how much interest you have accumulated, how long you plan to stick with the new plan, how long you'll be on that new plan if you plan to switch/consolidate (such as with a private consolidation loan when you become an attending).

I switched from IBR to REPAYE when it first became available, after 2 or 3 years of payments in IBR. I had a lot of interest capitalize. But I did the math, and taking into account another two years of residency/fellowship, the interest subsidy of REPAYE ended up more than making up for the capitalized interest in my case.

I think it's pretty rare to actually come out ahead by filing separately unless your spouse is making a lot of money and doesn't owe much (ie, you're a resident with large loans, spouse is an attending with no loans)--you lose so many tax benefits. It may be worthwhile to do a thorough calculation if you haven't done one already.
Thank you for the reply, I will probably just stick with the PAYE option. I would only be going to our REPAYE for one year so from what I’m gathering it is not going to be greatly beneficial.
We did save several thousand dollars by filing together, which is good however I wish my accountant didn’t screw this up as overall I don’t know what my total payment would be. Again appreciate your thoughts
 

RangerBob

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Thank you for the reply, I will probably just stick with the PAYE option. I would only be going to our REPAYE for one year so from what I’m gathering it is not going to be greatly beneficial.
We did save several thousand dollars by filing together, which is good however I wish my accountant didn’t screw this up as overall I don’t know what my total payment would be. Again appreciate your thoughts
There are a few good payment calculators online. But I would expect your yearly payment to go up roughly 4K per year from what it is now, assuming you were making the same last year.

Make sure your accountant got you the student loan interest deduction-if I recall, you may not be eligible for it if you are married and file single, but you definitely are if you file jointly.