How does IBR work?

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slawww
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How does IBR work?

Postby slawww » Thu Mar 07, 2013 1:48 am

I figured those in this thread would probably have the most knowledge about the financial aspect of law school. So how exactly does IBR work?

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Davidbentley
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Re: How does IBR work?

Postby Davidbentley » Thu Mar 07, 2013 2:25 am

http://www.ibrinfo.org/what.vp.html

Far more elucidating than the convoluted responses you'll get here.

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slawww
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Re: How does IBR work?

Postby slawww » Thu Mar 07, 2013 10:58 am

Davidbentley wrote:http://www.ibrinfo.org/what.vp.html

Far more elucidating than the convoluted responses you'll get here.


Thanks, I don't know why I thought you loan was forgiven after 10 years? So that's only if your doing PI work, otherwise it's 25 years?

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A. Nony Mouse
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Re: How does IBR work?

Postby A. Nony Mouse » Thu Mar 07, 2013 11:40 am

slawww wrote:
Davidbentley wrote:http://www.ibrinfo.org/what.vp.html

Far more elucidating than the convoluted responses you'll get here.


Thanks, I don't know why I thought you loan was forgiven after 10 years? So that's only if your doing PI work, otherwise it's 25 years?

Yup.

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slawww
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Re: How does IBR work?

Postby slawww » Thu Mar 07, 2013 12:01 pm

A. Nony Mouse wrote:
slawww wrote:
Davidbentley wrote:http://www.ibrinfo.org/what.vp.html

Far more elucidating than the convoluted responses you'll get here.


Thanks, I don't know why I thought you loan was forgiven after 10 years? So that's only if your doing PI work, otherwise it's 25 years?

Yup.


Got it, so IBR really doesn't help all too much then unless you qualify for the PSLF?

Here's the example I used:

Let's say you have 100k in loans and you make 60k/year

10% of 60k is 6k. So if you're paying 6k/year, you will have payed off your loan in far less than 25 years. i don't see how this is helpful for someone with this range of debt & salary. $500/month would definitely hurt financially, and you would pay off the loan before 25 years. Shouldn't the payment be lowered? I suck at math, so if I added this up incorrectly, let me know.

Also, let's say I do PI work for like 5 years and then go into private practice. Once I start private practice, am I no longer eligible for the 10 year forgiveness plan? Thanks!

09042014
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Re: How does IBR work?

Postby 09042014 » Thu Mar 07, 2013 12:04 pm

slawww wrote:
A. Nony Mouse wrote:
slawww wrote:
Davidbentley wrote:http://www.ibrinfo.org/what.vp.html

Far more elucidating than the convoluted responses you'll get here.


Thanks, I don't know why I thought you loan was forgiven after 10 years? So that's only if your doing PI work, otherwise it's 25 years?

Yup.


Got it, so IBR really doesn't help all too much then unless you qualify for the PSLF?

Here's the example I used:

Let's say you have 100k in loans and you make 60k/year

10% of 60k is 6k. So if you're paying 6k/year, you will have payed off your loan in far less than 25 years. i don't see how this is helpful for someone with this range of debt & salary. $500/month would definitely hurt financially, and you would pay off the loan before 25 years. Shouldn't the payment be lowered? I suck at math, so if I added this up incorrectly, let me know.

Also, let's say I do PI work for like 5 years and then go into private practice. Once I start private practice, am I no longer eligible for the 10 year forgiveness plan? Thanks!


Interest on 100K loans is 6-7K a year. You probably wouldn't even be paying all the interest. And after 25 years you'll still have 100K in debt.

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slawww
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Re: How does IBR work?

Postby slawww » Thu Mar 07, 2013 12:13 pm

Desert Fox wrote:
Interest on 100K loans is 6-7K a year. You probably wouldn't even be paying all the interest. And after 25 years you'll still have 100K in debt.


Yep, definitely didn't factor that into the equation. Thanks

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A. Nony Mouse
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Re: How does IBR work?

Postby A. Nony Mouse » Thu Mar 07, 2013 12:13 pm

slawww wrote:Got it, so IBR really doesn't help all too much then unless you qualify for the PSLF?

Here's the example I used:

Let's say you have 100k in loans and you make 60k/year

10% of 60k is 6k. So if you're paying 6k/year, you will have payed off your loan in far less than 25 years. i don't see how this is helpful for someone with this range of debt & salary. $500/month would definitely hurt financially, and you would pay off the loan before 25 years. Shouldn't the payment be lowered? I suck at math, so if I added this up incorrectly, let me know.

Also, let's say I do PI work for like 5 years and then go into private practice. Once I start private practice, am I no longer eligible for the 10 year forgiveness plan? Thanks!

Desert Fox is right about the interest, as I understand it. And honestly, if someone's making $60K a year, $500/month is a drag but isn't ruinous compared to what the normal payment would be.

Anyway, as for the PI part, it's 120 payments, not 10 years. You don't have to do them consecutively. So you could work in PI for 5 years, then if you go into private practice, your loan payments will go up (assuming your salary goes up), and those payments won't count to PSLF. But if after 3 years of private practice you go back into PI, then any further payments you make will continue to count toward the 120. (But my impression is that you have to sign up for IBR to begin with - I believe if you start off on a normal payment plan you can't step back down to IBR. At least, that's what I was told; it may have changed with the recent changes to PAYE.)

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Re: How does IBR work?

Postby 09042014 » Thu Mar 07, 2013 12:21 pm

Also it's not 10%, it's 10% of (salary minus (150% times poverty level)). So less than 10%. Single bro - no baby doods - in contiguous 48 states. You'd pay $530.

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slawww
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Re: How does IBR work?

Postby slawww » Thu Mar 07, 2013 1:15 pm

Desert Fox wrote:Also it's not 10%, it's 10% of (salary minus (150% times poverty level)). So less than 10%. Single bro - no baby doods - in contiguous 48 states. You'd pay $530.


Wait, how'd you get that? I got 10% of 60k being 6k, divided by 12 months at $500/month. How'd you get 530 if you subtracted from the 10%.

Also, is the 10% pre-tax salary?

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Re: How does IBR work?

Postby 09042014 » Thu Mar 07, 2013 1:18 pm

slawww wrote:
Desert Fox wrote:Also it's not 10%, it's 10% of (salary minus (150% times poverty level)). So less than 10%. Single bro - no baby doods - in contiguous 48 states. You'd pay $530.


Wait, how'd you get that? I got 10% of 60k being 6k, divided by 12 months at $500/month. How'd you get 530 if you subtracted from the 10%.

Also, is the 10% pre-tax salary?


Opps, I used the old 15% rule. My bad. It's really like 350.

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slawww
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Re: How does IBR work?

Postby slawww » Thu Mar 07, 2013 1:21 pm

Desert Fox wrote:
slawww wrote:
Desert Fox wrote:Also it's not 10%, it's 10% of (salary minus (150% times poverty level)). So less than 10%. Single bro - no baby doods - in contiguous 48 states. You'd pay $530.


Wait, how'd you get that? I got 10% of 60k being 6k, divided by 12 months at $500/month. How'd you get 530 if you subtracted from the 10%.

Also, is the 10% pre-tax salary?


Opps, I used the old 15% rule. My bad. It's really like 350.


Gotcha, well damn, that's really not too bad.

09042014
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Re: How does IBR work?

Postby 09042014 » Thu Mar 07, 2013 1:25 pm

slawww wrote:
Desert Fox wrote:
slawww wrote:
Desert Fox wrote:Also it's not 10%, it's 10% of (salary minus (150% times poverty level)). So less than 10%. Single bro - no baby doods - in contiguous 48 states. You'd pay $530.


Wait, how'd you get that? I got 10% of 60k being 6k, divided by 12 months at $500/month. How'd you get 530 if you subtracted from the 10%.

Also, is the 10% pre-tax salary?


Opps, I used the old 15% rule. My bad. It's really like 350.


Gotcha, well damn, that's really not too bad.


It's not. But your loan total will be growing the whole time.

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slawww
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Re: How does IBR work?

Postby slawww » Thu Mar 07, 2013 5:08 pm

Desert Fox wrote:
It's not. But your loan total will be growing the whole time.


True, but as long as your loan is forgiven after 10 or 25 years it shouldn't matter, right?

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Re: How does IBR work?

Postby 09042014 » Thu Mar 07, 2013 5:20 pm

slawww wrote:
Desert Fox wrote:
It's not. But your loan total will be growing the whole time.


True, but as long as your loan is forgiven after 10 or 25 years it shouldn't matter, right?


10 year, yea no problem.

25 year you'll get taxed on your forgiveness.

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slawww
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Re: How does IBR work?

Postby slawww » Thu Mar 07, 2013 5:37 pm

Desert Fox wrote:
slawww wrote:
Desert Fox wrote:
It's not. But your loan total will be growing the whole time.


True, but as long as your loan is forgiven after 10 or 25 years it shouldn't matter, right?


10 year, yea no problem.

25 year you'll get taxed on your forgiveness.


Really? How much?

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francesfarmer
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Re: How does IBR work?

Postby francesfarmer » Thu Mar 07, 2013 5:38 pm

slawww wrote:
Desert Fox wrote:
slawww wrote:
Desert Fox wrote:
It's not. But your loan total will be growing the whole time.


True, but as long as your loan is forgiven after 10 or 25 years it shouldn't matter, right?


10 year, yea no problem.

25 year you'll get taxed on your forgiveness.


Really? How much?

I think it is taxed as income.

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slawww
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Re: How does IBR work?

Postby slawww » Thu Mar 07, 2013 5:44 pm

francesfarmer wrote:I think it is taxed as income.


I'm a poor K-JD, so my knowledge of taxes is pretty much non-existent. Would you be able to elaborate?

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Re: How does IBR work?

Postby Anonymous User » Thu Mar 07, 2013 5:52 pm

slawww wrote:
francesfarmer wrote:I think it is taxed as income.


I'm a poor K-JD, so my knowledge of taxes is pretty much non-existent. Would you be able to elaborate?


In year 25, say your annual salary is $60,000 and you have a loan balance of $100,000 forgiven, you have $160,000 of "income" that year where as you would regularly have only $60,000 income. You'll be taxed on $160,000, not $60,000.

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francesfarmer
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Re: How does IBR work?

Postby francesfarmer » Thu Mar 07, 2013 5:53 pm

slawww wrote:
francesfarmer wrote:I think it is taxed as income.


I'm a poor K-JD, so my knowledge of taxes is pretty much non-existent. Would you be able to elaborate?

http://en.wikipedia.org/wiki/Income_tax ... ted_States

Assuming you are married after 25 years and you have 100k in debt after 25 years (the number may be higher depending on interest but I'm too lazy to calculate it), the 100k will be tacked onto your income. So disqualifying your other income and any deductions you may take (which could be substantial, but probably won't be), this is what the tax would come out to:

The first chunk is $17,850 x 10% = $1,785
The next chunk is $54,649 x 15% = $8,197.35
The final chunk is $27,499 x 25% = $6,874.75

So your total tax on $100,000 (not considering other income or deductions) is $16,857.10.

Or I'm bad at taxes. Or maybe this isn't actually taxed as income. Someone correct me.

This also assumes that IBR will still exist 25 years after you graduate from law school, which is not certain.

lukertin
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Re: How does IBR work?

Postby lukertin » Thu Mar 07, 2013 5:59 pm

^ assuming you don't have an income is terrible, you will be taxed at a higher rate than that.

what counts as PI? is any gov't job "PI"?

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Re: How does IBR work?

Postby 09042014 » Thu Mar 07, 2013 6:03 pm

lukertin wrote:^ assuming you don't have an income is terrible, you will be taxed at a higher rate than that.

what counts as PI? is any gov't job "PI"?


Yes.

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francesfarmer
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Re: How does IBR work?

Postby francesfarmer » Thu Mar 07, 2013 6:05 pm

lukertin wrote:^ assuming you don't have an income is terrible, you will be taxed at a higher rate than that.

what counts as PI? is any gov't job "PI"?

The tax rate is progressive, obviously. I never said anything about the tax rate OP would have in this scenario.

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Re: How does IBR work?

Postby lukertin » Thu Mar 07, 2013 6:06 pm

Desert Fox wrote:
lukertin wrote:what counts as PI? is any gov't job "PI"?

Yes.

That's hilarious.

09042014
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Re: How does IBR work?

Postby 09042014 » Thu Mar 07, 2013 6:07 pm

lukertin wrote:
Desert Fox wrote:
lukertin wrote:what counts as PI? is any gov't job "PI"?

Yes.

That's hilarious.


Yea it's pretty retarded.




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