Overview: Looking for advice. Currently in SAVE forbearance and needing to switch later this year. I've been using calculators online and getting different answers from different calculators. It seems fairly certain I will choose IBR or RAP.
My details: I'm an old borrower, pre-2014. Loans originally were between 60 and 65k. 3 degrees in total (1 BA, 2 MA). Graduate loans, some of which were private and have been paid in full. Chose the PSLF route back in 2012 and consolidated. Bad advice from a loan servicer led to additional capitalization in the 2010s. I have 3 years of qualifying employment certified and have been a SAHM to our 3 children in recent years. Even though I have paid for my loans over the years, the balance has ballooned to 145k now. Highest interest rate among a mix is 6%. My forgiveness date without PSLF is 2037 if I don't switch to RAP (the tax bomb would be massive though).
Income and family: My husband makes 60k and I contribute 3600 through my late mother's pension. We are considering me going back to work to complete the remaining 7 years of PSLF (I can make about 60k as a teacher).We have 3 children, oldest 11 and youngest 2.
My goal is to pay as little back as possible. Not really looking for feedback on that.
With our income uncertain in the next few years (65k vs 125k annually is a huge difference), I'm uncertain which plan is best for our situation. I was thinking about filing taxes separately but we live in a community property state which complicates things. I also would prefer to stay in 1 plan rather than bounce from plan to plan (long wait times, more paperwork, interest capitalization). RAP might be the lowest monthly number but I'm afraid of being locked into years of extra payments if PSLF doesn't happen for me for any number of reasons.
Thank you if you took the time to read this and if you have any advice to offer.
Advice wanted: IBR vs RAP
byu/No-Veterinarian946 inStudentLoans
Posted by No-Veterinarian946
3 Comments
Seven years of PSLF qualifying employment to wipe out 145k with no tax bomb versus decades of RAP payments with a massive tax bomb at the end, if going back to teaching is viable the PSLF path is almost certainly the right one. The key question is how confident you are in 7 consistent years of qualifying employment.
Been going through similar mess with my loans after military service – the whole system is just designed to confuse people at this point
From what you’re describing, IBR might be your safer bet here. RAP can give you lower payments now but if PSLF falls through for whatever reason (and trust me, there’s always some bureaucratic nonsense that can mess things up), you’re stuck with way more years of payments. With IBR you at least have that 20-year forgiveness backup even if it comes with tax bomb.
The income uncertainty thing is huge factor too – if your husband’s income goes up or you start working again, IBR adjusts annually so you’re not locked in some terrible rate. RAP is more rigid and harder to get out of once you’re in it. I’ve seen too many people get trapped because they thought their situation would stay same.
Community property state filing separate is tricky but might be worth talking to tax person about, especially if you do go back to work. Could save you bunch on payments depending how numbers work out.
Interest only capitalizes if you leave IBR. It does not capitalize if you leave RAP or any other income driven plan other than IBR.
You could go on RAP, and later go back onto IBR if you chose to do so. You’re not locked in.
PSLF will lead to the lowest amount paid for sure.