Damn RePAYE is a real Butt F to high millenials

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Desert Fox
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Damn RePAYE is a real Butt F to high millenials

Postby Desert Fox » Thu May 07, 2015 12:35 pm

25 years instead of 20.

Married income counts.

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AreJay711
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Re: Damn RePAYE is a real Butt F to high millenials

Postby AreJay711 » Thu May 07, 2015 12:39 pm

Do you have a link on this? Googling wasn't helpful.

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kray
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Re: Damn RePAYE is a real Butt F to high millenials

Postby kray » Thu May 07, 2015 12:44 pm

https://www.insidehighered.com/news/201 ... nt-program

This is actually great for me, as I took out my first loan in August of 2007 and have been rueing the day since.

ETA: Not including 25 years/married income in my definition of "great"

dixiecupdrinking
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Re: Damn RePAYE is a real Butt F to high millenials

Postby dixiecupdrinking » Thu May 07, 2015 12:49 pm

The marriage income thing is the real killer.

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AreJay711
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Re: Damn RePAYE is a real Butt F to high millenials

Postby AreJay711 » Thu May 07, 2015 12:51 pm

I think I dodged the change. I'll just pretend I did and deal with it in 9-19 years.

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Desert Fox
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Re: Damn RePAYE is a real Butt F to high millenials

Postby Desert Fox » Thu May 07, 2015 12:52 pm

if you already had PAYE, then nothing changes.

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Single-Malt-Liquor
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Re: Damn RePAYE is a real Butt F to high millenials

Postby Single-Malt-Liquor » Thu May 07, 2015 1:04 pm

So this replaces PAYE for people who will graduate in the future?

sweeteavodka
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Re: Damn RePAYE is a real Butt F to high millenials

Postby sweeteavodka » Thu May 07, 2015 1:06 pm

So if you want to stay in IBR/PAYE, can you still file separately and have the payment based on the borrower's income, correct? The only way the married income provision comes into play is if you moved into RePAYE.

SmokeyBar
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Re: Damn RePAYE is a real Butt F to high millenials

Postby SmokeyBar » Thu May 07, 2015 1:09 pm

Arg, estoppel? I relied on the 20-year aspect of PAYE when choosing to go to law school....

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Desert Fox
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Re: Damn RePAYE is a real Butt F to high millenials

Postby Desert Fox » Thu May 07, 2015 1:13 pm

u can still do old paye.

But i do hope President Jeb Bush pwns all PAYE now.

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swampman
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Re: Damn RePAYE is a real Butt F to high millenials

Postby swampman » Thu May 07, 2015 1:25 pm

it would not alter any existing program

So this just expands eligibility to people who otherwise wouldn't have been eligible (but with more limitations than PAYE and no public service loan forgiveness)?
Is the plan that after this passes they'll get rid of PAYE for new borrowers, and everyone will be on REPAYE?

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A. Nony Mouse
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Re: Damn RePAYE is a real Butt F to high millenials

Postby A. Nony Mouse » Thu May 07, 2015 1:33 pm

swampman wrote:
it would not alter any existing program

So this just expands eligibility to people who otherwise wouldn't have been eligible (but with more limitations than PAYE and no public service loan forgiveness)?
Is the plan that after this passes they'll get rid of PAYE for new borrowers, and everyone will be on REPAYE?

PSLF isn't tied to IBR/PAYE in any way. You have to be eligible to use an income-based repayment plan, but it doesn't (at the moment) matter which you use or what its terms are. So this doesn't affect PSLF. Your employment makes you eligible or not for PSLF, not which repayment plan you use.

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Hand
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Re: Damn RePAYE is a real Butt F to high millenials

Postby Hand » Thu May 07, 2015 1:33 pm

swampman wrote:
it would not alter any existing program

So this just expands eligibility to people who otherwise wouldn't have been eligible (but with more limitations than PAYE and no public service loan forgiveness)?
Is the plan that after this passes they'll get rid of PAYE for new borrowers, and everyone will be on REPAYE?


I didn't see that part in the linked article - but if you can combine this with PSLF, it's an improvement for those on that track

ETA except for that "can't exclude spouse's income" part

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Monochromatic Oeuvre
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Re: Damn RePAYE is a real Butt F to high millenials

Postby Monochromatic Oeuvre » Thu May 07, 2015 1:56 pm

PAYE bros, please don't get married. Law school gave you a virus, and instead of giving you the vaccine, DOE just made you contagious to your wife.

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swampman
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Re: Damn RePAYE is a real Butt F to high millenials

Postby swampman » Thu May 07, 2015 2:22 pm

Hand wrote:
swampman wrote:
it would not alter any existing program

So this just expands eligibility to people who otherwise wouldn't have been eligible (but with more limitations than PAYE and no public service loan forgiveness)?
Is the plan that after this passes they'll get rid of PAYE for new borrowers, and everyone will be on REPAYE?


I didn't see that part in the linked article - but if you can combine this with PSLF, it's an improvement for those on that track

ETA except for that "can't exclude spouse's income" part

My bad, misread page 2 of the proposal (https://www.documentcloud.org/documents ... posal.html — if you fail to provide income or family info, you will be placed on an "alternative repayment plan," and payments under that plan don't count towards PSLF).

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A. Nony Mouse
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Re: Damn RePAYE is a real Butt F to high millenials

Postby A. Nony Mouse » Thu May 07, 2015 2:30 pm

Yeah, I think that's basically the same idea as now (though obviously new language) - if you don't provide proof of income to show you qualify for the income-based repayment plans and get put on the standard 10 year plan, payments wouldn't count toward PSLF (the idea being that if you have the income to pay it off in 10 years PSLF is meaningless to you anyway).

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AVBucks4239
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Re: Damn RePAYE is a real Butt F to high millenials

Postby AVBucks4239 » Thu May 07, 2015 2:59 pm

I'd love for somebody smarter than me to determine at what income/debt ratio it's actually an economically viable long-term investment strategy to do PAYE/IBR. My guess is somewhere around $200k debt but that's just a pure guess on my part.

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sinfiery
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Re: Damn RePAYE is a real Butt F to high millenials

Postby sinfiery » Thu May 07, 2015 3:29 pm

AVBucks4239 wrote:I'd love for somebody smarter than me to determine at what income/debt ratio it's actually an economically viable long-term investment strategy to do PAYE/IBR. My guess is somewhere around $200k debt but that's just a pure guess on my part.


Very crude and ignoring investment opportunity/TVM of PAYE changing over time:

Paying back 200k @ 7.2% over 10 years = 280k total payment
PAYE @ 200k @ 7.2% over 20 years @ 98k/year income = 280k total payment (200k loan forgiveness which may be included in taxes @ yr 20)

PAYE also has lower payments on the front end so if you could likely invest 180k (assuming you had 280k saved u by year 10) at @ 5% with a 10 year bond or something and net 70k in interest over 10 years to make PAYE even cheaper

PAYE calculator to mess with: https://studentloans.gov/myDirectLoan/m ... ment-plans

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lacrossebrother
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Re: Damn RePAYE is a real Butt F to high millenials

Postby lacrossebrother » Thu May 07, 2015 4:02 pm

the fact that you can't write loan payments off of taxes because boomers think that owning houses is the only worthwhile debt makes the math pretty easy.

maybe the best rough calculation would be figure out total you'd pay on PAYE + 35% tax bomb(be sure to account for increasing salary but increasing 150 Pov. Rate), discount it 10 years then compare to what you'd pay on the 10 year refi'd plan.

that's assuming you could afford both but are interested to know which is better.

wildhaggis
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Re: Damn RePAYE is a real Butt F to high millenials

Postby wildhaggis » Thu May 07, 2015 5:59 pm

Could a borrower just keeping making PAYE or IBR payments after the 20- or 25-year mark (instead of applying for forgiveness) to avoid the tax bomb? I guess assuming they had accumulated illiquid assets they do not want to liquidate to pay taxes? If illiquid assets result in a huge tax check after forgiveness that is not easily payable from cash funds, continuing to make payments in certain circumstances would certainly lessen the disruption that would have on your life.

Honestly not sure why someone would want to do this or if all of the math even makes sense. It just seemed like an interesting question.

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AVBucks4239
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Re: Damn RePAYE is a real Butt F to high millenials

Postby AVBucks4239 » Thu May 07, 2015 6:34 pm

sinfiery wrote:
AVBucks4239 wrote:I'd love for somebody smarter than me to determine at what income/debt ratio it's actually an economically viable long-term investment strategy to do PAYE/IBR. My guess is somewhere around $200k debt but that's just a pure guess on my part.


Very crude and ignoring investment opportunity/TVM of PAYE changing over time:

Paying back 200k @ 7.2% over 10 years = 280k total payment
PAYE @ 200k @ 7.2% over 20 years @ 98k/year income = 280k total payment (200k loan forgiveness which may be included in taxes @ yr 20)

PAYE also has lower payments on the front end so if you could likely invest 180k (assuming you had 280k saved u by year 10) at @ 5% with a 10 year bond or something and net 70k in interest over 10 years to make PAYE even cheaper

PAYE calculator to mess with: https://studentloans.gov/myDirectLoan/m ... ment-plans

I think this oversimplifies the equation, though. What about 20 years worth of lost deductions for you and your spouse because you have to file separately? What about paying the capital gains tax on top of what you have to take out to pay your forgiven debt? What if you get an amazing opportunity (go solo and win some amazing settlement) and no longer have a financial hardship (and then your loans capitalize)?

I just don't think it's worth it to try and do PAYE. My amateur calculations are as follows:

General
Income: $47,500 gross (also do side work, so it's probably close to $55,000)
Debt: $150,000 when I graduated (down to $144,000 after six months)

PAYE General
PAYE 20 Year Estimate: $102,000 payments
Forgiven Amount: $249,000
Tax Liability (.38): ~$97,000
Capital Gains Tax (need to take .16 more than tax liability): $19,000

Deductions Lost for Filing Separately
Student Loan Interest Deduction
Married Deduction
Dependent Care Credit (if we hired a babysitter)
Pretty much any other tax credit

Everything combined (including all the deductions), my calculation is as follows to stay on PAYE for 20 years:

PAYE payments = $102,000
Tax Liability = $116,000
Lost Deductions/Refunds Over 20 Years for Filing Separately (x2 because spouse couldn't claim them either) = $125,000
Total = $343,000

Or I could pay them off in 8 years and pay $190,000.

TL;DR: the government isn't going to stop making us bend over just because we graduated, and I'm probably better off just paying them off.

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JohannDeMann
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Re: Damn RePAYE is a real Butt F to high millenials

Postby JohannDeMann » Thu May 07, 2015 9:06 pm

AVBucks4239 wrote:
sinfiery wrote:
AVBucks4239 wrote:I'd love for somebody smarter than me to determine at what income/debt ratio it's actually an economically viable long-term investment strategy to do PAYE/IBR. My guess is somewhere around $200k debt but that's just a pure guess on my part.


Very crude and ignoring investment opportunity/TVM of PAYE changing over time:

Paying back 200k @ 7.2% over 10 years = 280k total payment
PAYE @ 200k @ 7.2% over 20 years @ 98k/year income = 280k total payment (200k loan forgiveness which may be included in taxes @ yr 20)

PAYE also has lower payments on the front end so if you could likely invest 180k (assuming you had 280k saved u by year 10) at @ 5% with a 10 year bond or something and net 70k in interest over 10 years to make PAYE even cheaper

PAYE calculator to mess with: https://studentloans.gov/myDirectLoan/m ... ment-plans

I think this oversimplifies the equation, though. What about 20 years worth of lost deductions for you and your spouse because you have to file separately? What about paying the capital gains tax on top of what you have to take out to pay your forgiven debt? What if you get an amazing opportunity (go solo and win some amazing settlement) and no longer have a financial hardship (and then your loans capitalize)?

I just don't think it's worth it to try and do PAYE. My amateur calculations are as follows:

General
Income: $47,500 gross (also do side work, so it's probably close to $55,000)
Debt: $150,000 when I graduated (down to $144,000 after six months)

PAYE General
PAYE 20 Year Estimate: $102,000 payments
Forgiven Amount: $249,000
Tax Liability (.38): ~$97,000
Capital Gains Tax (need to take .16 more than tax liability): $19,000

Deductions Lost for Filing Separately
Student Loan Interest Deduction
Married Deduction
Dependent Care Credit (if we hired a babysitter)
Pretty much any other tax credit

Everything combined (including all the deductions), my calculation is as follows to stay on PAYE for 20 years:

PAYE payments = $102,000
Tax Liability = $116,000
Lost Deductions/Refunds Over 20 Years for Filing Separately (x2 because spouse couldn't claim them either) = $125,000
Total = $343,000

Or I could pay them off in 8 years and pay $190,000.

TL;DR: the government isn't going to stop making us bend over just because we graduated, and I'm probably better off just paying them off.

I've already showed you how much of a dummy you are for paying down your debt when your PAYE would be like 200 bucks. You are crazy. This analysis is so biased its laghable.

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BarbellDreams
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Re: Damn RePAYE is a real Butt F to high millenials

Postby BarbellDreams » Thu May 07, 2015 10:05 pm

As I am reading it, this only affects borrowers where one has a ton of debt and the other one has little to nothing and they file separately to lower the PAYE payments but now won't be able to. If you spouse and you both have significant debt they will count the 10% of your combined income for payments for your COMBINED loans correct?

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AVBucks4239
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Re: Damn RePAYE is a real Butt F to high millenials

Postby AVBucks4239 » Thu May 07, 2015 10:15 pm

JohannDeMann wrote:I've already showed you how much of a dummy you are for paying down your debt when your PAYE would be like 200 bucks. You are crazy. This analysis is so biased its laghable.

Forgive me for being dense, but I'm just not good at math and I honestly can't recall you responding to me about this in a previous thread. I've posted my scenario on so many different forums (Reddit, TLS, handful of others) that I can't keep track of all of them. Also, I'm on my cell phone and the search function isn't great.

Can you link me to your analysis? I'm only six months into this so I'm not "pot-committed" to paying these off and am certainly open to ideas.

For the record, TLS remains the only place that pretty much calls me an idiot for not doing PAYE. But I'm open to your rationale/numbers.

Edit: I did find a thread in the Financial Aid section where you talk about paying the minimum, putting money in stocks for five years, give yourself some security, and then see what happens.

I get that, but I still have yet to see someone show me that, over the long term (20 years) doing PAYE will cost less than just paying it off in 8 years (deductions included). Where am I going wrong?

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Br3v
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Re: Damn RePAYE is a real Butt F to high millenials

Postby Br3v » Thu May 07, 2015 11:28 pm

Wait, what does this mean for a current 2L who took out their first loan after 2007? Can I still qualify for the old PAYE?




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