How does IBR work?

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lukertin
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Re: How does IBR work?

Postby lukertin » Thu Mar 07, 2013 6:11 pm

I just ballparked the figures for IBR, it would be useless to me :x

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slawww
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Re: How does IBR work?

Postby slawww » Thu Mar 07, 2013 6:13 pm

francesfarmer wrote:
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.


Well that fucking sucks. How is that supposed to help anyone?

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A. Nony Mouse
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Re: How does IBR work?

Postby A. Nony Mouse » Thu Mar 07, 2013 6:21 pm

slawww wrote:Well that fucking sucks. How is that supposed to help anyone?

It's semi-hypocritical of me to say this since I'm banking on the 10-year PSLF, but no one has any right to get loans forgiven. And if you do have $100K in loans left after 25 years because you haven't had the income to pay it off, paying ~$17K to get rid of that is better than paying $100K. (I guess my point is really that the problem is not with IBR, it's with the easy access to loans completely out of proportion with a graduate's likely income. And with schools charging such high tuition to begin with.)

Morgan12Oak
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Re: How does IBR work?

Postby Morgan12Oak » Thu Mar 07, 2013 6:25 pm

IBR has existed all of 4 years since 2009. This means that its 21 years until the IRS/taxpayer has to even deal with the fact that one can face a massive tax bomb at the end of IBR.

I have no clue whether IBR will exist in 21 years and in its current form, but if you have like 200k in debt and are making like <50k, you have no choice then to hope it will continue to exist.

The really scary part is if you have like 200k in debt, and are making IBR payments of like $500, you can owe upwards of like 600k after 25 years because the IBR payments not even matching interest. Then in 25 years you face a huge income balloon of 600k that year.

Now, you can fall under the IRS insolvency exception and they won't tax you on the debt forgiveness, but if you have any assets whatsoever in 25 years, the IRS could have an argument to tax you on the full 600k, or other scary amount.

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francesfarmer
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Re: How does IBR work?

Postby francesfarmer » Thu Mar 07, 2013 6:26 pm

A. Nony Mouse wrote:
slawww wrote:Well that fucking sucks. How is that supposed to help anyone?

It's semi-hypocritical of me to say this since I'm banking on the 10-year PSLF, but no one has any right to get loans forgiven. And if you do have $100K in loans left after 25 years because you haven't had the income to pay it off, paying ~$17K to get rid of that is better than paying $100K. (I guess my point is really that the problem is not with IBR, it's with the easy access to loans completely out of proportion with a graduate's likely income. And with schools charging such high tuition to begin with.)

Assuming a scenario in which you pay $350 a month for 25 years, you're actually paying more than $120k in total, not counting for inflation, change in marital status and thus a change in monthly payment/income bracket, etc. I agree with your overall point (specifically that the problem is high tuition), but I wanted to point this out.

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A. Nony Mouse
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Re: How does IBR work?

Postby A. Nony Mouse » Thu Mar 07, 2013 6:32 pm

francesfarmer wrote:
A. Nony Mouse wrote:
slawww wrote:Well that fucking sucks. How is that supposed to help anyone?

It's semi-hypocritical of me to say this since I'm banking on the 10-year PSLF, but no one has any right to get loans forgiven. And if you do have $100K in loans left after 25 years because you haven't had the income to pay it off, paying ~$17K to get rid of that is better than paying $100K. (I guess my point is really that the problem is not with IBR, it's with the easy access to loans completely out of proportion with a graduate's likely income. And with schools charging such high tuition to begin with.)

Assuming a scenario in which you pay $350 a month for 25 years, you're actually paying more than $120k in total, not counting for inflation, change in marital status and thus a change in monthly payment/income bracket, etc. I agree with your overall point (specifically that the problem is high tuition), but I wanted to point this out.

Yeah, I realized I understated that after reading your post and the one above it - how much your debt will balloon given that you're not even paying interest. The consequences are fairly horrifying. I mean, if your income is low enough for 25 years that you're only paying that small amount, I'm not sure what better options would be, but it's not a panacea.

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slawww
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Re: How does IBR work?

Postby slawww » Thu Mar 07, 2013 7:30 pm

A. Nony Mouse wrote:
slawww wrote:Well that fucking sucks. How is that supposed to help anyone?

It's semi-hypocritical of me to say this since I'm banking on the 10-year PSLF, but no one has any right to get loans forgiven. And if you do have $100K in loans left after 25 years because you haven't had the income to pay it off, paying ~$17K to get rid of that is better than paying $100K. (I guess my point is really that the problem is not with IBR, it's with the easy access to loans completely out of proportion with a graduate's likely income. And with schools charging such high tuition to begin with.)


I definitely agree with you, and as someone interested in PI law, I'm also definitely banking on the 10-year PSLF. But, that being said, the point of IBR is to assist in paying for astronomical student debt. Paying taxes on that forgiven loan seams counter-productive. Especially if you've already paid 120k+ like the poster above mentioned. While I agree that paying 16k to have 100k+ forgiven is still a good deal, but 16k + taxes on your 60k salary would basically leave you broke for the year.

Pokemon
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Re: How does IBR work?

Postby Pokemon » Thu Mar 07, 2013 8:14 pm

A few quick questions...
Student loan interests are not compoundable correct? Meaning on 100k debt, interest expenses never go more than 7k? If this is the case, then 600k debt or something along those lines becomes hugely unrealistic.

Do we get a choice on whether to pay interest or principal under IBR or other payment methods? If not, is there e methodology. If debt is not compoundable then this makes a huge difference.

Can we overpay under IBR? Can we make sure the overpayment goes to principal?

Final question, interest payments are tax deductible, correct? How does that affect the tax bomb after 25 years of IBR? Doesn't the tax deduction make it easier than it would otherwise be to eat on the principal?

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slawww
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Re: How does IBR work?

Postby slawww » Thu Mar 07, 2013 11:53 pm

Pokemon wrote:A few quick questions...
Student loan interests are not compoundable correct? Meaning on 100k debt, interest expenses never go more than 7k? If this is the case, then 600k debt or something along those lines becomes hugely unrealistic.

Do we get a choice on whether to pay interest or principal under IBR or other payment methods? If not, is there e methodology. If debt is not compoundable then this makes a huge difference.

Can we overpay under IBR? Can we make sure the overpayment goes to principal?

Final question, interest payments are tax deductible, correct? How does that affect the tax bomb after 25 years of IBR? Doesn't the tax deduction make it easier than it would otherwise be to eat on the principal?


I'm not sure what any of this really means, but it sounds like something I'd also be curious about.

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eav1277
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Re: How does IBR work?

Postby eav1277 » Fri Mar 08, 2013 12:00 am

slawww wrote:
Pokemon wrote:A few quick questions...
Student loan interests are not compoundable correct? Meaning on 100k debt, interest expenses never go more than 7k? If this is the case, then 600k debt or something along those lines becomes hugely unrealistic.

Do we get a choice on whether to pay interest or principal under IBR or other payment methods? If not, is there e methodology. If debt is not compoundable then this makes a huge difference.

Can we overpay under IBR? Can we make sure the overpayment goes to principal?

Final question, interest payments are tax deductible, correct? How does that affect the tax bomb after 25 years of IBR? Doesn't the tax deduction make it easier than it would otherwise be to eat on the principal?


I'm not sure what any of this really means, but it sounds like something I'd also be curious about.


Lol. Not making fun. I don't fully understand it either

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Tiago Splitter
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Re: How does IBR work?

Postby Tiago Splitter » Fri Mar 08, 2013 12:28 am

Pokemon wrote:Student loan interests are not compoundable correct?

Correct, at least under IBR, where interest does not compound.

Pokemon wrote:Final question, interest payments are tax deductible, correct? How does that affect the tax bomb after 25 years of IBR? Doesn't the tax deduction make it easier than it would otherwise be to eat on the principal?

You can only deduct $2500 per year, and even then only if your income is below a certain threshold (phase out range is 60-75K for a single filer.)

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somewhatwayward
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Re: How does IBR work?

Postby somewhatwayward » Fri Mar 08, 2013 12:43 am

slawww wrote:Well that fucking sucks. How is that supposed to help anyone?


I agree that it is a shitty system but the shitty part of it is the fact that school is so expensive, not that there is not a robust enough loan forgiveness plan. I am torn because I want to do something to help people who are already indebted and screwed but I also know that whatever plan it is will be used to entice more students to irresponsibly take on way more debt than they can pay back. The buck has to stop somewhere. I hope at least some people scrutinize IBR and look at the tax bomb and say to themselves no fucking way am I relying on that plan and decide to either take a no-stips scholarship, retake the LSAT, or not go at all. IBR is not a fallback, and it is borderline criminal the way law schools tout is as an alternative payment plan. It's not a payment plan because you never pay your loan down. It just keeps ballooning.

I guess what I am saying is, helping who? Helping people who are already indebted is one thing, but I do not want any part of helping prospective students feel safe in taking out way too much debt for schools with bleak prospects. Ugh, what a mess we are in. It is unfair in that it is not the prospective students' fault that tuition is so ridiculously high, but they have options to avoid big debt, and that is the only responsible thing to do.

slawww wrote:I'm not sure what any of this really means, but it sounds like something I'd also be curious about.


BTW, based on this comment and others you have made in this thread, you should really get some basic financial literacy education. I don't mean that in a condescending way but it is really important to understand and the concepts being thrown around in this thread are pretty simple.

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slawww
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Re: How does IBR work?

Postby slawww » Fri Mar 08, 2013 2:57 am

somewhatwayward wrote:
I agree that it is a shitty system but the shitty part of it is the fact that school is so expensive, not that there is not a robust enough loan forgiveness plan. I am torn because I want to do something to help people who are already indebted and screwed but I also know that whatever plan it is will be used to entice more students to irresponsibly take on way more debt than they can pay back. The buck has to stop somewhere. I hope at least some people scrutinize IBR and look at the tax bomb and say to themselves no fucking way am I relying on that plan and decide to either take a no-stips scholarship, retake the LSAT, or not go at all. IBR is not a fallback, and it is borderline criminal the way law schools tout is as an alternative payment plan. It's not a payment plan because you never pay your loan down. It just keeps ballooning.

I guess what I am saying is, helping who? Helping people who are already indebted is one thing, but I do not want any part of helping prospective students feel safe in taking out way too much debt for schools with bleak prospects. Ugh, what a mess we are in. It is unfair in that it is not the prospective students' fault that tuition is so ridiculously high, but they have options to avoid big debt, and that is the only responsible thing to do.


I agree, but for something touted as a forgiveness plan, it's clearly not very forgiving.

somewhatwayward wrote:BTW, based on this comment and others you have made in this thread, you should really get some basic financial literacy education. I don't mean that in a condescending way but it is really important to understand and the concepts being thrown around in this thread are pretty simple.


Well yeah, as I decide on where/if I'll attend law school, that's what I'm trying to do. I just graduated from college and have only worked minimum wage-ish jobs, so finance & taxes have been irrelevant and foreign to me thus far.

joetheplumber
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Re: How does IBR work?

Postby joetheplumber » Fri Mar 08, 2013 3:15 am


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Re: How does IBR work?

Postby Anonymous User » Fri Mar 08, 2013 9:29 am

slawww wrote:I agree, but for something touted as a forgiveness plan, it's clearly not very forgiving.


IBR for anything other than PSFL is probably a bad option for one coming out of law school. Most lawyers, even if they start at doc review, won't be making the $40k for 25 years that would make IBR worth it. I'd imagine most lawyers would quit the legal field entirely if they had to live off $40k until they're 50 (this, assuming you went to law school right after undergrad).

IBR for PSFL, however, is really great. Imagine someone who, like myself, hopes to transition from the state level to the federal level for prosecution. I'll be making an average of $41k for the first three years of my career, which puts me at a total of about $11k paid in loans. Assuming I do make it to the feds, I'd average that at around $80k (after starting lower and having pay raises higher) over the next seven years, which is about $66k paid in loans. My school's own loan repayment assistance will cover most of my first three years of loan payments (the 11k). I have $175,000 in student loans. That means after 10 years under IBR with PSLF I'll scoot by paying $66-70k in loans and have the rest of my debt forgiven. If I had been on a standard repayment plan over 10 years, I would have paid $250,000.

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somewhatwayward
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Re: How does IBR work?

Postby somewhatwayward » Fri Mar 08, 2013 10:04 am

slawww wrote:
somewhatwayward wrote:
I agree that it is a shitty system but the shitty part of it is the fact that school is so expensive, not that there is not a robust enough loan forgiveness plan. I am torn because I want to do something to help people who are already indebted and screwed but I also know that whatever plan it is will be used to entice more students to irresponsibly take on way more debt than they can pay back. The buck has to stop somewhere. I hope at least some people scrutinize IBR and look at the tax bomb and say to themselves no fucking way am I relying on that plan and decide to either take a no-stips scholarship, retake the LSAT, or not go at all. IBR is not a fallback, and it is borderline criminal the way law schools tout is as an alternative payment plan. It's not a payment plan because you never pay your loan down. It just keeps ballooning.

I guess what I am saying is, helping who? Helping people who are already indebted is one thing, but I do not want any part of helping prospective students feel safe in taking out way too much debt for schools with bleak prospects. Ugh, what a mess we are in. It is unfair in that it is not the prospective students' fault that tuition is so ridiculously high, but they have options to avoid big debt, and that is the only responsible thing to do.


I agree, but for something touted as a forgiveness plan, it's clearly not very forgiving.


It is a repayment plan, not a forgiveness plan; it is even in the name 'income-based repayment.' I'm going to go out on a limb and guess that it is law schools touting it as a forgiveness plan. If you haven't already started attending law school, I would strongly urge you to, rather than falling into the IBR trap, take a near full-tuition scholarship w no stipulations or, if you are unhappy with the schools that offered you full-tuition scholarships, retake the LSAT until you are happy with the full-tuition offers you get. Yes, PLSF is a good program, but it is pretty dangerous to take on big debt with the assumption that you will land a PLSF-eligible job. That is about as hard as big law.

somewhatwayward wrote:BTW, based on this comment and others you have made in this thread, you should really get some basic financial literacy education. I don't mean that in a condescending way but it is really important to understand and the concepts being thrown around in this thread are pretty simple.


Well yeah, as I decide on where/if I'll attend law school, that's what I'm trying to do. I just graduated from college and have only worked minimum wage-ish jobs, so finance & taxes have been irrelevant and foreign to me thus far.


I hear you. I didn't understand much about it at that point in my life either. But you shouldn't take out a significant loan without having basic financial literacy.

ETA: I looked into IBR a little more and found out some interesting stuff. First of all, regarding the tax bomb, there is an insolvency exception. You are insolvent if your liabilities exceed your assets. You get to reduce the amount added to your income from the forgiveness by the extent of your insolvency if any. Thus, if you have 100K in assets and 125K in liabilities, your extent of insolvency is 25K. Thus, if 100K is forgiven, you would get to reduce that amount by 25K, so you would only be taxed on 75K. I wonder if we will see gaming of this exception around the 25-year mark. It might be hard to get a lender to agree to lend to you if you've still got 100K in student loans 25 years after your graduated (LOL) but maybe you could get a relative to assign a debt of their to you briefly. Anyway if my description is not clear, you can read more about this here, p. 5-6. The other thing I read was that if you leave the program, the unpaid interest capitalizes (ie, gets added to your principal debt). When Pokemon was asking about repaying at a level above what the government asks for, it made me wonder if there would be a point where the government would say 'well, if you are able to pay this much extra, you must not need this program' and kick you out (have no idea this is the case but I wondered about it). If it were the case, you would want to avoid this since the unpaid interest would capitalize.
Last edited by somewhatwayward on Fri Mar 08, 2013 10:36 am, edited 1 time in total.

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A. Nony Mouse
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Re: How does IBR work?

Postby A. Nony Mouse » Fri Mar 08, 2013 10:12 am

somewhatwayward wrote:It is a repayment plan, not a forgiveness plan; it is even in the name 'income-based repayment.'

This is exactly what I wanted to say. That's why there's such a big difference between PSLF (a forgiveness plan) and IBR.

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Re: How does IBR work?

Postby Anonymous User » Wed Mar 20, 2013 11:31 am

There's a bit of misinformation in this thread.

Most people who are starting law school now or have started in the past few years will be eligible for Pay As You Earn, which is basically a new form of IBR that took effect last December.

You are eligible for PAYE if you didn't receive a gov't loan before 2007 and have at least one federal loan disbursed after October 2011.

You also have to qualify for a partial financial hardship.

Once you are on PAYE, you never lose eligibility. Your monthly payment will never be higher than it would have been under the standard 10 year repayment plan.

Under PAYE, you pay 10% of your AGI above the poverty line. Say you owe $200k in student loans, and make $70k. Under PAYE, your monthly payment would be $444. Such a payment normally would not even cover the interest on the loan. Once you make qualifying payments for 20 years, (not the 25 as under IBR), you can apply for forgiveness.
The tax treatment right now is that the forgiven amount counts as income. Yes, at first glance that sounds bad. However, you'll want to consider a few things. The first is that the time value of money means that paying tax on the forgiven amount will be easier in 20 years than trying to pay the balance over nearly as long while paying much more per month in an attempt to cut through the high interest rate. Simply put, the money is much more valuable to you now than it will be then. Second, you only pay tax up to the amount of your net worth, so if you happen to be dirt poor and don't have much in the way of assets by the time the 20 years rolls around, your tax burden will be negligible.

I agree though with the concerns expressed that schools will use these types of programs of to induce people to not worry about the cost of school. Essentially the government is just paying the costs of higher education. Schools need to be held accountable and I think stricter protocols for disbursement of student loans should be in place so schools have incentives to keep costs down. Right now schools have little incentive reign in the costs.

There is no certainty that PAYE will exist in its current form in 20 years, but there is no reason to think that the government will just get rid of it completely. After all, they literally just enacted the program a few months ago.

PAYE is a better deal for almost EVERY student with loans above the $150k+ mark if they aren’t making biglaw money, although it will depend on your COL and other factors. I think you’ll find that in coming years even grads with biglaw will begin to use the program. More and more students are graduating with $250k+ debt, and even with Biglaw salary a new grad will qualify for PAYE.

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Rahviveh
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Re: How does IBR work?

Postby Rahviveh » Wed Mar 20, 2013 2:03 pm

Anonymous User wrote:There's a bit of misinformation in this thread.

Most people who are starting law school now or have started in the past few years will be eligible for Pay As You Earn, which is basically a new form of IBR that took effect last December.

You are eligible for PAYE if you didn't receive a gov't loan before 2007 and have at least one federal loan disbursed after October 2011.

You also have to qualify for a partial financial hardship.

Once you are on PAYE, you never lose eligibility. Your monthly payment will never be higher than it would have been under the standard 10 year repayment plan.

Under PAYE, you pay 10% of your AGI above the poverty line. Say you owe $200k in student loans, and make $70k. Under PAYE, your monthly payment would be $444. Such a payment normally would not even cover the interest on the loan. Once you make qualifying payments for 20 years, (not the 25 as under IBR), you can apply for forgiveness.
The tax treatment right now is that the forgiven amount counts as income. Yes, at first glance that sounds bad. However, you'll want to consider a few things. The first is that the time value of money means that paying tax on the forgiven amount will be easier in 20 years than trying to pay the balance over nearly as long while paying much more per month in an attempt to cut through the high interest rate. Simply put, the money is much more valuable to you now than it will be then. Second, you only pay tax up to the amount of your net worth, so if you happen to be dirt poor and don't have much in the way of assets by the time the 20 years rolls around, your tax burden will be negligible.

I agree though with the concerns expressed that schools will use these types of programs of to induce people to not worry about the cost of school. Essentially the government is just paying the costs of higher education. Schools need to be held accountable and I think stricter protocols for disbursement of student loans should be in place so schools have incentives to keep costs down. Right now schools have little incentive reign in the costs.

There is no certainty that PAYE will exist in its current form in 20 years, but there is no reason to think that the government will just get rid of it completely. After all, they literally just enacted the program a few months ago.

PAYE is a better deal for almost EVERY student with loans above the $150k+ mark if they aren’t making biglaw money, although it will depend on your COL and other factors. I think you’ll find that in coming years even grads with biglaw will begin to use the program. More and more students are graduating with $250k+ debt, and even with Biglaw salary a new grad will qualify for PAYE.



This doesn't sound like a bad deal then. but how would being on IBR/PAYE for 20 years affect your credit? You would not be able to get a mortgage, car, etc?

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Re: How does IBR work?

Postby deebs » Tue Mar 26, 2013 12:59 pm

That tax bomb is only on principal. The hypothetical tax bomb on 100k is 25 years in the future; inflation will be your best friend. The new "pay as you earn" program is the way to go, but the rules (haven't gotten someone to confirm yet) forbid anyone from this plan that has a student loan prior to some time in 2007, meaning most k-jd's freshman year stafford loan would preclude based off plain reading.

Say you got a 10k scholarship at a top 20 school and didn't get big law. You're left with 150k in principal debt most likely, although interest, thanks to Obama, has already been running and you probably have 15k in interest already. You get the first job of 60k and try to use the whole government pays first three years of interest generated that month that your payment doesn't cover, which roughly 10k will be generated in interest each year.

Your first 10k every year goes solely to interest generated that year (ignoring compounding interest for now since interest itself seems a confusing topic to some in this thread). So your 60k turns into 40k post taxes, then covering interest leaves you at 30k. Now you have to put more down to your loans, obviously, or your interest will just be back next year, leaving you in the same place after year 1 if you don't take down the already accumulated interest, hoping to actually start paying principal within a couple years. So you put down another 10k, living off 20k that year, saving nothing most likely. Next year, your principal is 150k still, but you've paid that interest generated while in school down to 5k, for an outstanding balance of 155k. Next year rolls around you make, say 70k. You take home about 45k, and put 20k of that towards your loans. Now your outstanding interest is paid off for that year, accumulated interest is paid off that year, and principal is still around 150k. All while somehow living off 35k for two years (obv helps if you're living in kansas), 0 in savings, etc.
You've paid 45k in debt, are two years into paying, and your principal is still 150k.

Next year rolls around, and you've somehow managed another 10k salary increase, making 80k. You pay your taxes and everything else, and your take home is around say 55-60k. By mastering the art of living only be necessity, you drop another 25k into your loans, 10k of which covers the interest generated in this year, and you've finally paid that principal down to 135k.

Now, after three years of paying, you've paid 75k into your loan repayment, with 135k still running at 6%. You're also 30, your girlfriend wants to get married (you were too poor to even pay for someone's dinner a few years ago, s, have kids, and you have 0 savings.

Good luck actually paying anywhere close to these totals for the first three years to somewhat position yourself to pay them down efficiently. IBR is the only possible way to live for some.

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Re: How does IBR work?

Postby wildhaggis » Tue Mar 26, 2013 2:45 pm

The October 2007 cut-off seems unusual, though I guess any cut-off will be arbitrary.

I've heard some mention that they had federal loans prior to the cut-off, seemingly precluding them from qualifying, but somehow qualified for the program after consolidating all of their federal loans.

I know the recency of the program means a lot of this is nebulous to most. Any idea why consolidation would allow someone to qualify with pre-2007 federal loans?

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Re: How does IBR work?

Postby TTRansfer » Tue Mar 26, 2013 2:49 pm

Desert Fox wrote:
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.


Yet pretty awesome. Makes me really consider government.

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deebs
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Re: How does IBR work?

Postby deebs » Thu Mar 28, 2013 12:50 pm

wildhaggis wrote:The October 2007 cut-off seems unusual, though I guess any cut-off will be arbitrary.

I've heard some mention that they had federal loans prior to the cut-off, seemingly precluding them from qualifying, but somehow qualified for the program after consolidating all of their federal loans.

I know the recency of the program means a lot of this is nebulous to most. Any idea why consolidation would allow someone to qualify with pre-2007 federal loans?


No idea, I talked to my school's fin aid director yesterday, but I couldn't get clarification re: pre-2007 loans. I asked if paying off those pre-2007 loans would be a way to get around it, but I have to call my actual service provider to find out. It would be nice to get some confirmation on consolidating to meet that requirement, the differences in payments under IBR v PYE is very substantial.

I did learn that all interest generated during law school is capitalized into the principal when repayment begins (how awesome!!!) and that IBR/Pay-as-you earn will also capitalize all interest into principal if you no longer meet the financial hardship requirement. She didn't know how that if/when this happens, if the new principal amount would be used for the hardship requirement.

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gwuorbust
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Re: How does IBR work?

Postby gwuorbust » Thu Mar 28, 2013 6:41 pm

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


This is true for IBR, but for PAYE interest capitalization is capped at 10% of the amount you entered PAYE with.

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kalvano
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Re: How does IBR work?

Postby kalvano » Thu Mar 28, 2013 7:20 pm

Quick PAYE question: any loan that came from the feds and is disbursed through the school is a Federal Direct loan, right? Even a Grad PLUS loan? And those are eligible for PAYE?




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