Fears About Income-Based Repayment Forum

[rustyspoon]

I will be graduating in May 2021 with $130k in total student debt (undergrad + law school). I have a job offer to work in my state Attorney General's office after graduation doing civil litigation (constitutional claims, torts, employment, etc). The position pays $60k. I don't want to say which state, but it's East Coast.

This position will qualify for public service loan forgiveness (PSLF) through the federal government, but I have reservations about going on the income-based repayment (IBR) plan for my loans. Namely, I see myself staying at the AG's office for only 2-3 years to gain relevant experience, and then I'd like to try to transition to big/mid law. My concerns are as follows:

1. During my time at the AG's office making $60k and making payments on the IBR plan, my student loan balance will be appreciating because the payments will likely not cover the interest accruing. So I could potentially be in the situation where I make ~2 years of payments on the IBR plan, and my total balance has gone from $130k to $145k. Although I'd be 20% of the way toward PSLF, if I leave for private practice at this time, I'd be two years removed from school staring down a student loan burden higher than it was at graduation. Not ideal.

2. If I choose a traditional repayment plan, I would be making significantly higher payments, but at least my total balance would be going down. However, this path would be risky if I never make the transition to private practice (for whatever reason) because I'd be giving up the opportunity to get PSLF after 10 years.

3. The current state of PSLF is sketchy. Not sure if I'd want to rely on it even if I was sure I wanted to work in government for 10 years.

I am curious if anyone else faced this dilemma, and what route they chose. Granted, I could continue on the IBR plan even in private practice, but I will end up with a big tax bill at the end of that process.

Mods: I apologize if I have posted in the wrong forum. I reviewed all of my options, and this one seemed the most relevant. Please move if necessary.

[Anonymous User]

You can be on IBR and make monthly payments that are higher than the minimum.

[nixy]

Yeah, you could make larger payments until you know for certain that you're not going to end up in private practice. But you're kind of stuck - either you make the minimum payments and your loan appreciates, or you make payments that you might not have to make if you stay in government. You're going to have to pick your poison.

I think it might make sense to go on IBR and make the lower payments until such a time as you leave government work. First, you might not leave government work. Second, if you do, then you can refinance the loans if you decide to pay them off. Third, there are people in biglaw on IBR on the theory that they will benefit more from investing the extra cash sooner rather than paying off the loans sooner.

I think concerns about PSLF being sketchy are overblown, but that's obviously subjective.

[Anonymous User]

You absolutely should get on an IBR repayment plan and submit all PSLF documentation so that each month counts toward the 120 for forgiveness. Then, nothing will be stopping you from overpaying your bill, should you so choose. Plans change all the time. Maybe after 3 years, you'll do the math and realize that 7 more in a PSLF-eligible job (with forgiveness at the end) is better than any private practice offer you have.