PAYE vs REPAYE for PSLF

[Ellomate]

QUICK INFO:
- 4th year medical student, begins Psychiatry Residency July 2023. (Psych residency is 4 years)
- Wedding on June 2023 (before residency). Will file taxes separately for previous year.
- Fiance is in insurance making a little above 100k (projected to rise every year+ annual bonus).
- Fiance has only 10k federal loans; left it because Biden proposed the 10k forgiveness.
- I have $312,102 of loans (Federal ubsub/sub loans, Grad PLUS)
- I am aiming for PSLF for now (although open to options)


Like many medical student, I lack in financial literacy.
I'm debating if I should w REPAYE vs PAYE.
And the question extends to if I should file MFS (Married Filing Separate) or MFJ (Joint).
I did not know, until recently, that my spouse's income will be factored into my repaying my loans if tax is filed jointly...

I know that choosing PAYE will allow me to file separately but I've been reading that there's benefit to doing REPAYE (lowering tax liability). In addition, I heard filing jointly can be beneficial to our tax burden.

There are so many questions I don't even know to ask due to my limited knowledge and understanding of this confusing process and complicated tax laws.
So any additional advice will be greatly apprecaited!

Thank you!

---

Members don't see this ad.

 

[RangerBob]

QUICK INFO:
- 4th year medical student, begins Psychiatry Residency July 2023. (Psych residency is 4 years)
- Wedding on June 2023 (before residency). Will file taxes separately for previous year.
- Fiance is in insurance making a little above 100k (projected to rise every year+ annual bonus).
- Fiance has only 10k federal loans; left it because Biden proposed the 10k forgiveness.
- I have $312,102 of loans (Federal ubsub/sub loans, Grad PLUS)
- I am aiming for PSLF for now (although open to options)


Like many medical student, I lack in financial literacy.
I'm debating if I should w REPAYE vs PAYE.
And the question extends to if I should file MFS (Married Filing Separate) or MFJ (Joint).
I did not know, until recently, that my spouse's income will be factored into my repaying my loans if tax is filed jointly...

I know that choosing PAYE will allow me to file separately but I've been reading that there's benefit to doing REPAYE (lowering tax liability). In addition, I heard filing jointly can be beneficial to our tax burden.

There are so many questions I don't even know to ask due to my limited knowledge and understanding of this confusing process and complicated tax laws.
So any additional advice will be greatly apprecaited!

Thank you!

Filing jointly is absolutely beneficial for your tax burden. With some repayment programs though it can increase your monthly payment. It's sort of moot though if you both have income and both have loans-- I doubt it would help to file separately.

StudentLoanPlanner and WhiteCoatInvestor are the two resources I'd start with on starting your financial literacy, as well as to learn about what repayment programs you should do.

Frankly, you're probably best just paying it off ASAP. You're going to have quite the income between the two of you, and you'll be making decent sized payments on an income-based program with or without your spouses income. If your job is public service and you're sure you'll be staying there through the end of the required 10 years it could be worthwhile to go for that. Hopefully you've got 3.5 years of qualifying payments as a psych resident, 4 if you consolidated right after you graduated and entered repayment immediately. Do the math and see what's the better route to go. You could always hedge your bets and make income-based repayments and then set aside a LARGE chunk each month to invest, so that if you change jobs for any reason and are no longer eligible for PSLF, then you've got those funds to pay down the loan quicker.

 

[SigmaFS]

A bit of a moving target right now because of the proposed changes to Income Driven Repayment plans: Briefly on the proposed changes:

• REPAYE will allow exclusion of spouse's income if MFS.
• REPAYE will provide a 100% interest subsidy of any negative amortization.
• The income exclusion will increase from 150% of poverty income to 225% of poverty income (this applies to both PAYE, New IBR, & REPAYE).

The proposed changes could be effective Oct 1, 2023. For this year, given you were single in 2022, consolidate immediately after MS/before starting residency and select REPAYE.

Congrats!

 

[deleted721365]

A bit of a moving target right now because of the proposed changes to Income Driven Repayment plans: Briefly on the proposed changes:

• REPAYE will allow exclusion of spouse's income if MFS.
• REPAYE will provide a 100% interest subsidy of any negative amortization.
• The income exclusion will increase from 150% of poverty income to 225% of poverty income (this applies to both PAYE, New IBR, & REPAYE).

The proposed changes could be effective Oct 1, 2023. For this year, given you were single in 2022, consolidate immediately after MS/before starting residency and select REPAYE.

Congrats!

Quick follow-up to this: I consolidated when I graduated residency during COVID. Obviously all of my loan debt is now my principal ( (and because of the loan freezes I don't have any accrued interest). My question is, since I have 450k in debt and I will have negative amortization when the payments start back up 2/2 to my resident salary does that mean that my monthly payments will actually go towards my principal? Since I will have 100% interest subsidy- or, is this incorrect?

Also, would the new REPAYE re-start my clock for PSLF? I'm nearly halfway there, definitely don't want to start over again. I'm assuming it would simply replace the outgoing REPAYE and that I won't even have the option of keeping my current REPAYE; however, with the government I leave nothing to chance.