I'm a recent master's graduate in music with about $70,000 in student loans with a $797 monthly payment expected. This is much higher than I anticipated, the IBR plan says $0 monthly and $0 will ever be paid but this seems too good to be true… no? Would I have to stay at a very low income in order to not pay the remaining balance of $149,000? Or go into public service to do PSLF?
I plan to talk to a professional but any help or experience with this plan is appreciated.
IBR Plan too good to be true?
byu/DiligentRow5359 inStudentLoans
Posted by DiligentRow5359
3 Comments
Why is your entire post in superscript? WTAF.
Having an $800/mo payment on $70k debt shouldn’t be a surprise. That’s a normal 10 year repayment and should line up with estimates from your entrance counseling or other documentation.
IBR is based on your income, if income goes up your payment will go up. Based on a simple formula: https://studentaid.gov/manage-loans/repayment/plans/income-driven If you’re pursuing PSLF then that can help a lot by keeping your costs down. If you’re NOT, then it can sometimes cost you more over the long term as interest accrues on the loan.
The $0 might be for this year but that will change from year to year. As your income changes, so will your payment. You have to update income once a year.
Also, at the end of that period any amount “forgiven” is then taxable income so you have to also plan for that (if not doing PSLF). What you owe now is going to balloon to much higher levels so that tax bomb could be significant.
“the IBR plan says $0 monthly and $0 will ever be paid”
It’s based on your most recent tax filings. If we assume you’re making little to nothing right now, that makes sense. This will get recalculated every year.
I don’t know what kind of earning potential you have, but that should determine your course of action. If you can make a strong salary in the private sector and just pay the loan off super-fast, consider doing that. If your income potential is low, you might want to look at PSLF.