(Closed) Income Based Repayment Anyone?

posted 5 years ago in Money
Post # 3
Member
1663 posts
Bumble bee
  • Wedding: September 2013

I am!  I’m enrolled in IBR for my grad school loans.  It really depends on your situation… clearly, for right now, it’s fantastic because they base your payment on how much you make.  The downside is that if you’re paying less each month, it effectively extends how long you have to pay.  I am hoping to do the new federal loan forgiveness program for those employed in public service– if all goes as planned, in 10 years the balance of my loans will be forgiven.  (Well, 9 years now.) 

 

But, regardless of your plans in the long term, if it makes your payments manageable when they would otherwise not be, I’d say do it.  Just keep in mind that you may want to reevaluate as your loans progress to see what things look like as your financial picture changes.

Post # 4
Member
11753 posts
Sugar Beekeeper
  • Wedding: November 1999

@laurel946:  I am either on Income Based or Income Contingent – can’t remember which but there is a slight difference.

Anyway, there’s nothing good to it really except that you won’t default on your loans because they lower your payment.  My payments are supposed to be $1500/month but I got it down much lower than that through the program.  You’re basically paying interest only so your balance does NOT go down at all which is heinous considering how much money you are pumping into it.  Because the payment was lowered so much, I am able to make more than minimum payments each month (but less than the original $1.5k payment) so I can see the balance go down.  My loans accrue about $600/month in interest alone!

It’s nice to have the program to protect you from defaulting but just be aware of how it works and the fact that it’s not lowering your balance at all – in fact it’s making it higher.

Post # 6
Member
485 posts
Helper bee
  • Wedding: December 2012

I am enrolled in it.  It both is and it isn’t as good as it sounds.

Basically, you end up paying interest only.   So, I have $63,xxx. in loans.  I graduated in June 2011.  In Oct 2011 I received my paperwork and the total monthly payment was almost $900.  I about flipped.  I called and the super not-helpeful customer service rep said he could take my payment down to around $750.  I told him that wouldn’t really help, so he forwarded me over to income based replayment.

My payments are now just under $300.  But my total balance has stayed exactly the same for the past year…. even though I have paid about $4000.  You can’t write off your loan for 20 years.  So, you take the reduced payments you will end up paying back WAY more than you would pay if you made the original payments.

In my case, it wouldn’t have mattered.  There was NO WAY I could make the payment.  Not even close.  Right now even the $300 is a struggle for me, so I don’t really feel like I have a choice until I can get some of my other debt under control.

 

However, if I could have made the regular payments and stayed on the regular schedule instead of doing the income based repayment, I would have.

Post # 8
Member
39 posts
Newbee

Agree with all the commenters. Honestly for me it wasn’t worth it. I am on a mission to have them paid of in 10 years or less. I know through my servicer I can see how much my total payment would be for all the different repayment options and with the income based the cost was just too high over the long run. Can you just defer a few of the loans for awhile? It really depends on your situation. 

Post # 9
Member
11753 posts
Sugar Beekeeper
  • Wedding: November 1999

@laurel946:  You can always pay more each month. It definitely is nice so all your income isn’t tied up in loans each month in case of an emergency, etc.  Even though I could make the original payment each month, I had it lowered so I could still save money and put money into my 401k each month.  It’s so important to save early esp when it comes to your 401k so it’s a balancing act and depends on your situation.  

Post # 10
Member
486 posts
Helper bee
  • Wedding: October 2012

The only thing you have to be ready for is the tax wallop you get the year your remaining balance gets forgiven. So you have to have quite a few thousand dollars saved up for that. Also research how much you’ll have to pay based on what you think your max salary will be. If you make above a certain amount, you may end up paying a high monthly amount. Best of luck!

Post # 11
Member
1663 posts
Bumble bee
  • Wedding: September 2013

@Nellular:  Hmm, good point about the tax stuff.

 

If your income goes up, your payments will too– but then you’ll be in a more comfortable situation, so hard to argue with that.  My income has gone up since I started IBR, but I am reminding myself that I make more money so that’s fair.

 

Ughhh, student loans are so frustrating! 

Post # 12
Member
7904 posts
Bumble Beekeeper
  • Wedding: March 2012 - Pelican Grand Beach Resort

@Almost Mrs.P:  Your payments can only ever go as high as they would be under Standard Repayment, right?

Post # 13
Member
6745 posts
Bee Keeper
  • Wedding: June 2014

I do IBR.  It was a much lower payment for me than income contingent.  And let’s be real, I couldn’t afford $1,750/mo to pay it off in 10 years.  Yes, that’s how much my loans were supposed to be.

I’m also doing the public loan forgiveness – in 10 years, I will have my loans forgiven, and it won’t be considered taxable income.  You have to do IBR and you have to make all your payments on time and you have to reconsolidate under Federal Direct and it only includes your federal loans. 

However, if you’re not doing public loan forgiveness, doing IBR means your loans are forgiven in 20 or 25 years (but, it’s taxable income). 

Hope this info helps!

Post # 15
Member
486 posts
Helper bee
  • Wedding: October 2012

@mrsSonthebeach:  I remember doing some calculations where the repayment would become higher than the standard option…but I’m basing it off the 25 yr version…ugh grad school! 

Post # 16
Member
332 posts
Helper bee
  • Wedding: August 2013

I was on IBR with my grad school federal loans after I graduated and my loans went into repayment. Instead of a $600 monthly payment, I was paying about $100/month and it really helped me out when I had rent, credit cards, and other utility bills to pay.

I have no idea how they calculated the amount I would repay because I used all sorts of online calculators to figure out what my repayment amount would be under the IBR plan, but it actually came out much less than the online calculators.

I stayed on this IBR plan for 2 years and now I am back to paying $600/month. Unfortunately, because I put off paying my full loan amount each month for 2 years, my total loan amount right now shows more due than what I started off with because of all the interest that built up. If you can pay a little more per month, I would recommend it!

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