Switching from IBR to REPAYE with PSLF: A Costly Mistake

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Recentgrad88
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Switching from IBR to REPAYE with PSLF: A Costly Mistake

Postby Recentgrad88 » Mon Dec 28, 2015 9:42 pm

I graduated last year and currently work in the public sector. Upon graduation I immediately signed up for IBR* with PSLF. While renewing IBR this month, I discovered that REPAYE became available this month, which would cut my payments by 1/3.

While doing some research of my own, however, I discovered that making this switch will result in a cap at $57,500 -- this is assuming, of course, the budget proposal passes.

Unfortunately, the call receivers at myfedloan are not privy to this information, because the budget proposal has not passed. As a result, many borrowers are likely to opt for REPAYE but could find themselves subject to the $57,500 cap if and when the budget proposal passes.

Here is the link to an official statement from the Department of Education's Office of Budget Services: http://studentdebtcenter.org/official-statements-on-obamas-2015-proposed-budget-pslf-caps-paye-benefits-limitations-2/

*I would have taken advantage of PAYE instead of IBR initially(not to be confused with REPAYE), but I did not qualify.

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twenty
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Re: Switching from IBR to REPAYE with PSLF: A Costly Mistake

Postby twenty » Tue Dec 29, 2015 3:50 am

I would imagine a borrower could switch from IBR to REPAYE back to IBR again though, right? I'd be more concerned if I were a new student entering with CO19.

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lacrossebrother
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Re: Switching from IBR to REPAYE with PSLF: A Costly Mistake

Postby lacrossebrother » Tue Dec 29, 2015 10:54 am

"After summarizing President Obama’s 2015 Budget Proposal last week"
-dated October 29, 2015.
Ummm...?

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A. Nony Mouse
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Re: Switching from IBR to REPAYE with PSLF: A Costly Mistake

Postby A. Nony Mouse » Tue Dec 29, 2015 1:09 pm

The proposed cap has been around for a while and it hasn't passed yet. The student loan regulations also state that you can switch your payment plan at any time.

Besides, the proposed cap is on PSLF itself. PSLF is separate from the repayment plan you use, except that only payments on an income-based plan go to PSLF. If PSLF gets capped, it will be capped whether you pay through IBR or REPAYE or whatever.

newlawgrad
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Re: Switching from IBR to REPAYE with PSLF: A Costly Mistake

Postby newlawgrad » Tue Aug 16, 2016 6:49 pm

A. Nony Mouse wrote:The proposed cap has been around for a while and it hasn't passed yet. The student loan regulations also state that you can switch your payment plan at any time.

Besides, the proposed cap is on PSLF itself. PSLF is separate from the repayment plan you use, except that only payments on an income-based plan go to PSLF. If PSLF gets capped, it will be capped whether you pay through IBR or REPAYE or whatever.


Reviving this thread just to ask if this has been fleshed out any further? Just started clerking, am looking to lower my monthly payment, and hope to go straight to gov after two years of clerking. Currently on IBR--even though I was in biglaw--and can save a lot per month by switching to REPAYE. Just want to make sure I am not making a gigantic mistake in terms of PSFL.

Biglaw Investor
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Re: Switching from IBR to REPAYE with PSLF: A Costly Mistake

Postby Biglaw Investor » Tue Dec 13, 2016 3:16 pm

newlawgrad wrote:Reviving this thread just to ask if this has been fleshed out any further? Just started clerking, am looking to lower my monthly payment, and hope to go straight to gov after two years of clerking. Currently on IBR--even though I was in biglaw--and can save a lot per month by switching to REPAYE. Just want to make sure I am not making a gigantic mistake in terms of PSFL.


The cap didn't get implemented. If it ever does, we don't know whether current borrowers will be grandfathered in to the old plan or not. As stated above, PSLF is separate from any of the income-driven repayment plans (IBR/REPAYE). To qualify for PSLF, you need to make 120 qualified payments (doesn't have to be consecutive). You can send in a certification form each year to the Department of Education so they can confirm that you've made qualifying payments that year. REPAYE is probably the way to go.

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studentloanplanner
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Re: Switching from IBR to REPAYE with PSLF: A Costly Mistake

Postby studentloanplanner » Mon Dec 26, 2016 2:04 am

newlawgrad wrote:Reviving this thread just to ask if this has been fleshed out any further? Just started clerking, am looking to lower my monthly payment, and hope to go straight to gov after two years of clerking. Currently on IBR--even though I was in biglaw--and can save a lot per month by switching to REPAYE. Just want to make sure I am not making a gigantic mistake in terms of PSFL.


Newlawgrad I second BigLaw Investor, who has a kickass personal finance website for lawyers btw, if you've haven't google'd it you should. Anyhow, if you're currently on IBR the only scenario where you wouldn't immediately switch to REPAYE is if you had a spouse with substantial income and no student debt or if you had a huge amount of accrued interest that would capitalize if you switched. In both of those situations, you'd just look at the numbers to see if the savings would be substantial enough to cover the tax penalty and the interest on interest.

You're probably in good shape to switch to REPAYE if your accrued interest is less than 20% of principal and you're single. Otherwise you might want to take a second look at it




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