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Discretionary Income/Federal Poverty Level
February 25, 2019
5:58 pm
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February 25, 2019
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Hi there,

Thank you so much for your wonderful website and all the helpful information it contains. So something has been bothering me…I’m quite irritated that they are looking at discretionary income based solely on the federal poverty level, which is the same for those popular 48 states. I currently have a very reasonable repayment amount with PAYE that is going to almost triple later this year. I got a promotion where my income is going up about 25%, but instead of my PAYE amount increasing by 25% is goes up almost 3x! This is crazy to me, and will be a huge hit on our budget. We live in Orange County, CA where costs are just out of control right now. There was a recent article that came out basically saying if you are in a family of 4 and your income is below 90k then you are low income. I’m about that amount in salary, and we are a family of 6 (so basically low income). According to the FPL we are doing well, but not so in this area. It really seems like where you live in the country should be a huge factor in your discretionary income. It’s not exactly fair that we’re put in the same category as some very low cost areas. I am barely able to make our budget work with the insane housing prices here, and tripling my PAYE amount is going to be a major blow. Any ideas on something that I can do about this? Is there another way around the program or do you think I should advocate with them (not that one small person like myself could make a difference) that they should reconsider how they view “discretionary income?” Clearly I won’t have as much discretionary income as someone making the same amount in most other areas of the country. I would appreciate any help or suggestions you may have! Or at least sympathizing with me ha. Thanks!!

February 25, 2019
6:06 pm
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May 3, 2014
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Thanks for stopping by and thanks for the kind words.

Your point about the need to make discretionary income location specific is a really good one. What might be plenty of money in one part of the country could be a real struggle in a higher cost of living area. Unfortunately, there is no way around this rule. Discretionary income is a set calculation and the only thing it really adjusts for is family size… but I don’t think having additional kids is a very good strategy to keep payment costs manageable 😉

A few weeks ago I wrote an article with a bunch of tax tips. The best way to get lower payments is to lower your AGI (that is the number the use as a starting point for PAYE calculations). The tax tips page has a few different strategies that can be used to lower the AGI, which lowers your discretionary income, which lowers you PAYE payments: https://studentloansherpa.com/tax-strategy-tips-deduction/

Best of luck to you!

February 26, 2019
12:11 pm
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February 25, 2019
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Thanks so much for taking the time to reply! It sounds like I’ve understood the problem fairly accurately and there’s not much I can do. Maybe they will reconsider how they count down the road. In the mean time I can slightly lower my payments by lowering my AGI as you suggested. Having more kids is not in the cards right now ha. Much appreciated!

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