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time to re-certify: deciding which is best continue IBR or switch to RePaye for both spouses
June 2, 2017
5:29 pm
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S.T.
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Hello, I'm sure you've heard from many readers how much this website has helped them. I wanted to re-iterate the same things. I am writing to ask a simple question that you've written about, but I figured I should ask anyway in case I overlooked anything.
My husband's student loans and my loans are due for re-certification. I have consolidated direct loans: $19k unsub and $18k sub. both at 6.6% with $3k accrued interest. for total $41k on Income- Based Plan. Representative calculated $0/mthly under IBR and $0 RePaye. I have been on IBR 3 years. If I switch to RePaye, those 3 years will count toward the 20 years on RePaye. I do not have graduated loans. My husband has Stafford Loans: $38k sub, $52k unsub both @ 6.8%. Total balance $90k. He was on Income Based, but was put on forbearance when he missed the recertification due date last year. I am aware he will not qualify for RePaye unless he consolidates his Stafford Loans. He is the only one who works. AGI $53K. And salary will increase. Family size 7. I am not working and will not return to work until 3-5 years from now. We normally file our taxes separately, but this year our CPA files us joint.
In your articles on RePaye vs IBR, it made sense for both spouses who has student loans to switch to RePaye, however since my husband's loans will not qualify him for RePaye, is it does not appear that RePaye would be the better option for me, correct? In terms of consolidating, would it benefit him overall? He is in process of submitting application for Teacher Forgiveness Loan and then would like to apply for Public Service Loan Forgiveness, which I know does not accept Stafford Loans. In thining of our future goals, we want to make decisions that will not impact us negatively. We have 3 kids and are saving for retirement and would like to purchase a home soon. What would you suggest we look at to make a better sound decision?

Thanks, S.T.

June 3, 2017
12:00 am
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Indiana
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May 3, 2014
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Great questions S.T.,

You definitely have a solid understanding of the issues at play, and based upon what you have mentioned, it doesn't seem to me like you are missing anything.

One fact you haven't mentioned but is worth pointing out is the difference in payment on REPAYE vs. IBR. If your monthly payments on IBR are $300, on REPAYE they would be $200. This is due to the fact that REPAYE only requires 10% of discretionary income while IBR charges 15%. This 5% difference can save a lot of money over the years.

You are also spot on about the consolidation issue. If your husband consolidates his Stafford loans, they can become eligible for REPAYE, as well as public service loan forgiveness. However, based upon your question it seems you are hesitant to take this step. Is there a reason for your concern? Are all of his loans Stafford?

I'd also mention that the Public Service Loan Forgiveness requires 120 certified eligible payments (10 years worth). This article has more detail on the program: http://studentloansherpa.com/p.....ine-print/ For your husband's loans, even though he may be teaching now, if they are Stafford loans they will not count towards the required ten years.

June 3, 2017
12:50 am
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ST
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Thank you for your prompt reply.
I supposed I'm hesitant because I'm afraid that in a few years when both our income total is high it'll cause a higher monthly payment that we might not be able to pay, or if my husband is the only one still bringing in income and he chooses not to go on REPAYE, that our payment might be high for me should I switch to REPAYE, since this plan will look at his income too.
I guess I have two scenarios working in my head: 1) when I return to work, if my salary is $56k/annually and my husband remains on IBR keeping in mind that his salary increases every year, if I am on REPAYE, then his income and mine would be calculated resulted in a higher payment than if I worked and was on IBR, providing that we file separately and submit only my income. Of course, at that time I can switch to another income-driven plan, but I don't want my interest capitalized and added when I switch plans. Sceanario 2 is if I am unsuccessful at finding employment or if I find employment but the salary is low, it would be better to remain on IBR.
Am I flawed in my thinking of these situations? I feel like I'm analyzing these too closely and it may be causing me to not see the big picture. I also remember the anxiety of not being able to make my payments and I don't want to be in that situation again. I know that it makes sense to be on REPAYE because within the next 5 year interest is accumulating under IBR whereas for REPAYE 50% of my interest is taken care of, plus it uses 10% discretionary income, and my 3 years on IBR is counted towards the 20 years, 120 on-time monthly payments, and it allows me to apply for public service forgiveness loan. Did I just find my answer? lol
And yes, all of his $90k is Stafford.

June 3, 2017
1:03 am
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ST
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I do have a question about teacher forgiveness loan that I need clarification on: do you have to be working with an approved school at the time of submitting the application before changing jobs or do you have to wait until it's reviewed and the application gets accepted in order to change employer so that they will accept all 5 years. I am trying to find out when will it be okay to change job after applying for the teacher forgiveness loan.

June 4, 2017
10:19 pm
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Indiana
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Forum Posts: 186
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May 3, 2014
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If you both are repaying student loans on an income driven repayment plan, it usually doesn't make sense to file taxes separately. This article goes into some detail the issues with being on an income driven repayment plan: http://studentloansherpa.com/i.....ent-loans/

I have not personally dealt with the teacher forgiveness loan program, so I'm hesitant to offer any thoughts on this issue. The best information I have found not this program can be found here: https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/teacher

Do these two links cover your questions?

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