Hello,
Thank you for helping everyone out. Here are my questions:
I have $200K in federal student loans. I currently earn $150K and my wife earns $90K (she has no loans).
1. I was on IBR from 2013-2015. However, I forgot to re-apply this year, and I have been on the standard repayment plan for the last 4 months. When I do apply now for the IBR, do my payments from the previous 3 years not count toward the 25 years forgiveness period? Would this mean I start 25 years all over??
2. When I mistakenly got off the IBR, did my interest capitalize and is there any way of getting them to reverse it?
3. Would I qualify for IBR if under my current salary, my standard payment amount is less than IBR amount?
4. If in the future, I am not earning anything, would my IBR drop to $0 and would that count towards 25 years?
5. I took out my first loan after 2007. Do i qualify for PAYE and do my previous years of (IBR+Standard) payments count toward the 20 years forgiveness period?
6. On IBR/PAYE, my loans may balloon to $1 million. What are the chances that I do not have to pay taxes on that?
Thank you so much for your help!
Ani

1. I don’t think you are ever “removed” from IBR unless you elect to….if you forget to recertify, my understanding is that you remain in IBR but are placed in a “permanent-standard” repayment plan, which is the highest your payments will ever be under IBR (which is, what a 10-year payment plan would have been monthly had you started one when you entered repayment). Now, as for people who elect to leave IBR (and pay whatever penalty that is, something like a full month of a 10-year repayment plan), I don’t know what would happen if you go back to IBR (regarding the 25 year clock)

2. I think so…you should have gotten a notice stating whether interest was capitalized. if it was no fault of their own, I don’t think you can get it reversed. I know that if you make too much money and no longer have a partial financial hardship, interest capitalizes.
3. IBR will never exceed your standard 10 year payment amount. Whether you qualify depends on if you have a partial financial hardship.
4. If you are under IBR, and you submit documentation showing you’ve had a sudden change of income, I"m sure $0 payments are a possibility, and AFAIK the 25 year counts. It’s different than PSLF. PSLF counts the number of payments….IBR counts the number of years.
5. according to the student aid website “you must also be a new borrower as of Oct. 1, 2007, and must have received a disbursement of a Direct Loan on or after Oct. 1, 2011. You are a new borrower if you had no outstanding balance on a Direct Loan or FFEL Program loan when you received a Direct Loan or FFEL Program loan on or after Oct. 1, 2007.”
6. Legislation was just introduced by Sen. Merkley to eliminate the tax…there seems to be a growing consensus that it needs to be tax free. With your salaries though, unless the interest is awful, you could probably pay them off fairly comfortably and be done with it. 25 years is an awfully long time to deal with student loans.

Thanks for the answers:

5. My question around PAYE was not around eligibility but whether my previous payments on IBR+Standard would count toward the 20 years forgiveness period. Let me know if there are any insights on this.

1. In order to apply for PAYE, do I need to consolidate my FFEL loan? I have 2 Direct loans and 1 FFEL loan. OR can I do PAYE on 2 out of my 3 loans, and IBR on my FFEL loan?

2. Under our income last year, we would qualify for PAYE. This year in August, I joined a new job in which my income is significantly higher. When applying for PAYE, can I still use my 2014 income, OR 2015 income (which includes half of the lower salary and half of the higher salary), OR do I have to use my “Current” higher salary?

3. If I don’t qualify for PAYE or IBR, should i continue paying standard monthly payments and apply for REPAYE in December or continue paying standard monthly payments until I plan to quit my job 2 years from now and then apply for PAYE/IBR?

4. In the application do I need to apply for IBR versus PAYE or it that automatic? There’s no option to select one or the other.

1. I think each loan has it’s own repayment plan. I don’t know how it works with loans under the same servicer, but I have a standard repayment plan with one servicer, and IBR with another…

2. When you fill out the application for an income based program, it only asked me to submit tax returns from the previous year, unless my income had changed drastically. So, I’d assume 2014 income

3. not sure what you are asking here….are you trying to figure out the best repayment plan?

4. There was an option on my online application form….It asks if to choose a repayment plan, or elect for the servicer to put you on the lowest monthly payment plan.

Just one more question:

When applying for IBR, I am entering my 2014 tax return. However, is it then asking me “If my income has significantly changed since 2014” which it is.
If I say yes, I will not qualify for IBR with my current income. Is there any way around it?

As far as I can tell you can choose either way and not be penalized. You can always ask to have your payments recalculated if your income drops, but I can’t find anything that says you must report any significant increases in income. If you choose tax returns, they can use your adjusted income as a reference. If you choose to document current income instead, they will only go by your gross income, since they don’t want to play the role of the IRS in determining what your adjusted income should be. I would suggest always choosing your tax returns, and only document alternative income if your income has decreased significantly.