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IDR Plans with 2 "Sets" of Loans
July 31, 2020
11:49 am
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Sam
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Hello everyone. I’ll be brief with my questions.

I have undergraduate subsidized loans that were out of grace years ago and have essentially remained “frozen” interest rate wise while I continued schooling. I took out additional unsubsidized loans for graduate school and those are currently in the “grace period”. With IDR plans, you are only supposed to have to pay a fixed percentage of your income on the loans each month.

I am being told by my servicer that when the unsubsidized loans come out of their grace period, that they will have their OWN payment, in addition to the payment that currently have for the subsidized graduate loans. By my obvious calculation, with the repayment being the same plan etc. and based on the same income information, that has the effect of “doubling” my student loan payment when the grace period of the unsubsidized loans is over.

Question:I really need to confirm if this is accurate. It won’t be a problem this year, and if it is next year, I’ll simply return to school before the recertification period.

I am against consolidating at this point because it is a bell I cannot unring. I am also considered about losing the distinction between loans as graduate and undergraduate because of some propsals that have been floated. I would hate to essentially lose any forgiveness made towards undergraduate loans specifically because I consolidated to save a bit on a measly monthly payment.

Question: I would assume that I am correct that if all subsidized and unsubsidized loans are consolidated, there is only 1 loan (duh) and its neither unsub/sub or undergrad/grad. I would also assume though, that for 25 yr forgiveness purposes, having had graduate loans included means it is 25years total and not 20 from the date of consolidation.

This is really insane to me because I cannot imagine someone who goes to school and stops/starts, they could easily have “IDR payments” that make them essentially have to pay what their standard repayment amount would be if each “group” of loans has their own payment.

Thank you for your time, everyone!

July 31, 2020
2:31 pm
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Indiana
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Great questions Sam.

I’ve been in exactly that position, so I can share my experience on the subject.

The loans will stay separate for repayment, but you will not be paying extra. For example, if in the IDR calculation they decide that your monthly payment is $100 per month, you may pay $30 towards one loan and $70 towards the other. However, the total monthly bill should be the same regardless of how many different loans you have on IDR.

Surprisingly, if you consolidate, you will end up with two loans, one consolidated loan that has all of your subsidized loans, and one consolidated loan that has all of the unsubsidized loans.

For forgiveness “clocks”, they are reset when you consolidate. Sometimes consolidation is a must, sometimes it should be avoided. This article breaks down the strategy that goes into the federal consolidation decision.

July 31, 2020
3:44 pm
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Sam
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Thank you! It didn’t make sense to me that just because the loans entered repayment at different times (years apart) that this would be able to make my payment increase (or effectively double with it being 2 sets of loans). It is very deceptive the way the message from my servicer was written….I guess I will see soon enough! I definitely wanted to keep the flexibility to have the free interest on any future unemployment/hardship/school deferments for the subsidized portion! I never thought somehow the new loans would “piggyback” off of the forgiveness counters of the old loans or anything. The link you included was great. I thought I knew a lot about this and I had no idea consolidation kept the sub/unsub separated still. Good to know though!

They’ve also told me I’ll have to reapply for REPAY prior to the unsubsidized loans coming out of grace before the year is up, and now they are telling me I don’ t need to. I can see that the old loans are shown as in REPAYE, yet the loans in the grace show Standard Repayment in the same area. I will probably go ahead and apply because I don’t trust them at all. How would they then default to being in the same IDR plan I already applied for in 2020 but would then have a new payment with no application? They make no sense!

July 31, 2020
5:23 pm
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Indiana
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Yeah, the servicers don’t always offer consistent information to borrowers.

I think the first question you should resolve is whether or not you will need to consolidate. If consolidation is in your future, you will be able to select the repayment plan as part of that process.

If you will not be consolidating, the important thing will be to get all loans on the same repayment plan. It may take a few calls to the servicer to figure out the best approach to entering repayment. Hopefully, you can speak to someone knowledgable enough to talk you through their process.

November 26, 2020
11:09 pm
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Just thought I’d share my update. After applying to get the 2nd set of loans into the REPAYE IDR plan like the loans I had that already were in that plan, I asked my servicer in writing what the new total payment would be. Not surprisingly, they replied back in writing that it would be an amount quite higher than what my previous payment was, close to double the payment. When I replied asking why the payment went up like this with no change to my income while I was on the same IDR plan for all my loans, I got crickets. The message disappeared from my secure inbox-after being saved of course. I had to ask again after a week, referencing my previous question. That question went partially unanswered with no explanation as to why I was told incorrect information. Instead, I received a payment breakdown, not unlike Michael indicated where the total payment was the same lower amount, just spread over ALL of my loans. I did not have to consolidate or “lose” any qualifying IDR forgiveness payments on my older “set” of loans either. They of course will have different time periods towards forgiveness, but the old payments “banked” do not have to be lost through consolidation.

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