Public Service Announcement: Income Based Loan Repayment

[NormalSaline]

Hey guys, congrats to those of you who matched. In talking to some of my friends who matched, I'm surprised by how many of them are planning on deferring and how few know about IBR.

Basically, its a federal program that allows you to pay a small percentage of your salary (if you make 40k/yr you end up paying like $400/mo) and for the first 3 years, the govt covers whatever additional interest cost there is.

This payment plan has other benefits which i'll let you look into yourself, but I think the low payment is manageable on a residents salary and youre at least paying interest on the loans instead of deferring and have it add up on you.

Heres a link with more info. Congrats again!

http://studentaid.ed.gov/PORTALSWebApp/students/english/IBRPlan.jsp

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[mustang sally]

Thanks for the tip! Hopefully I will be using this next year when the time rolls around!

 

[VeraShield]

Just to clarify, the government pays whatever interest is left-over from only your subsidized loans (and you aren't allowed to specify where your payment goes). So unless you took the Stafford subsidized loan for 8 years, the government won't be paying any of your interest (if you did, they would only pitch in ~$300/yr for 3 years).

So the main benefit is lower payments (+ no interest accruing on your subsidized loans since your payments cover it), but your unsubsidized loans will still continue to accrue interest.

 

[a runner]

Having the gov't pay the interest for 3 years on subsidized stafford loans might be beneficial (heck it's better than the regular repayment), but it isn't the main reason a resident might want to use IBR. It's really a great program for some residents if they have excessive debt and/or families to use for the long haul, not just residency.

If, for example, you are single, have $250,000 in federal student loan debt (this includes stafford-subsidized AND unsubsidized and grad plus loans), and you enter the IBR program, you will pay $300 per month on a $40,000 resident's salary. If your loans total $50,000, you still pay $300/mo. If you somehow have $1,000,000 in student loans (it's possible, but you'd have to play your cards right to attain that kind of balance.. lol), you pay $300.

Now, if you're married and have 2 kids like I do, then you only pay $80/month, regardless of my student loan balances (can we say "moral hazard"? ). This is because they calculate the payment as 15% of disposable income. Disposable income is defined as anything above 150% of the poverty level for your family size.

The thing is that you'll make much more as a pharmacist, and your payments will go up as well, so the program will only benefit you if you have large balances relative to your family income, and more so if you have kids, etc. After 25 years, any unpaid balance is "forgiven" and if you work for a non-profit hospital or government, then it's cancelled after 10 years of making payments, so for pharmacists it's really only beneficial if you have over ~$150k (~$100k if you have a decent sized family and your spouse doesn't work) in total loans and you plan on working non-profit or gov't.

Here is a calculator: http://studentaid.ed.gov/PORTALSWebApp/students/english/IBRCalc.jsp

I know a lot of people know this already and it's in the link you gave, but I'm always surprised how many of my classmates (ie. all) don't yet, that's why I mention it.

 

[confettiflyer]

Having the gov't pay the interest for 3 years on subsidized stafford loans might be beneficial (heck it's better than the regular repayment), but it isn't the main reason a resident might want to use IBR. It's really a great program for some residents if they have excessive debt and/or families to use for the long haul, not just residency.

If, for example, you are single, have $250,000 in federal student loan debt (this includes stafford-subsidized AND unsubsidized and grad plus loans), and you enter the IBR program, you will pay $300 per month on a $40,000 resident's salary. If your loans total $50,000, you still pay $300/mo. If you somehow have $1,000,000 in student loans (it's possible, but you'd have to play your cards right to attain that kind of balance.. lol), you pay $300.

Now, if you're married and have 2 kids like I do, then you only pay $80/month, regardless of my student loan balances (can we say "moral hazard"? ). This is because they calculate the payment as 15% of disposable income. Disposable income is defined as anything above 150% of the poverty level for your family size.

The thing is that you'll make much more as a pharmacist, and your payments will go up as well, so the program will only benefit you if you have large balances relative to your family income, and more so if you have kids, etc. After 25 years, any unpaid balance is "forgiven" and if you work for a non-profit hospital or government, then it's cancelled after 10 years of making payments, so for pharmacists it's really only beneficial if you have over ~$150k (~$100k if you have a decent sized family and your spouse doesn't work) in total loans and you plan on working non-profit or gov't.

Here is a calculator: http://studentaid.ed.gov/PORTALSWebApp/students/english/IBRCalc.jsp

I know a lot of people know this already and it's in the link you gave, but I'm always surprised how many of my classmates (ie. all) don't yet, that's why I mention it.

i've been advocating the above for years, thanks for providing hard numbers. I'd just do ad-hoc calculations and tell people.

 

[a runner]

i've been advocating the above for years, thanks for providing hard numbers. I'd just do ad-hoc calculations and tell people.

Haha yeah no prob. Good to hear I'm not the only out there promoting it. Do you ever get that blank stare look when you tell someone about it? Kinda like "yeah buddy you just keep on believing that ooooo-k...."

 

[confettiflyer]

Haha yeah no prob. Good to hear I'm not the only out there promoting it. Do you ever get that blank stare look when you tell someone about it? Kinda like "yeah buddy you just keep on believing that ooooo-k...."

yeah...no one believes this thing exists! i pull out the actual law, and people who read it can't understand it and still don't believe me. oyyy my head.

 

[Pharmy2012]

Guilty as charged-I had no idea this program existed. Can someone give me some quick and dirty info on who qualifies?? I plugged my numbers into the calculator but it says I would have a monthly payment of $0 per month...that can't be right?? Or is it?? I am planning on applying for residencies this fall and will graduate next May, and I currently have around $135,000 in school loan debt. Thanks for the help!

 

[confettiflyer]

Guilty as charged-I had no idea this program existed. Can someone give me some quick and dirty info on who qualifies?? I plugged my numbers into the calculator but it says I would have a monthly payment of $0 per month...that can't be right?? Or is it?? I am planning on applying for residencies this fall and will graduate next May, and I currently have around $135,000 in school loan debt. Thanks for the help!

Quick and dirty: http://www.ibrinfo.org/

It's two programs combined...think synergy!

 

[DHG]

I'm in my second year of residency... Thank goodness for IBR. The only problem is that several of my loans were sold to other companies after graduation, so I have to do the IRB paperwork THREE TIMES for three different lenders once a year.