Hi Heather/others,

I have a general question, and a context-specific explanation, for which I’d appreciate any input.

The question: If you switch to the REPAYE plan, can you leave REPAYE at any time and go to (or return to) another repayment plan, such as IBR?

The reason I ask:  Hypothetically, if people initially use REPAYE to cap their month payments at 10% AGI, and then their income later increases so much that their payment is higher than it would be under a standard 10-year repayment plan (which is a trade-off of REPAYE–no max caps on payments if you have high AGI) – then what is to stop people from using REPAYE early in their careers and then switching back to IBR later (to cap their maximum payments)?  Or is the answer simply, nothing? 

My situation specifically:

1.  Both wife and I are in PSLF jobs (and only in the first 2-3 years of that process – need to stick that out for another 7-ish years).

2.  We have very similar levels of school debt (~140k each).

3.  I make about twice as much as wife.  (e.g., if I make 100k, she makes 50k).

4.  We file taxes married filing jointly.  (While I understand that, under IBR, we could use married-filing-separately status to exclude income from each other’s payment calcultaions, we file jointly to qualify for other tax advantages, and our debt levels are similar anyway.  We have not closely evaluated whether, in the grand scheme of things, it would come out better to do married filing separately.)

5.  We have one child now, and possibly a second in the planning stages (but not yet).

6.  I am in a profession that lends itself to better advancement (salary-wise), but it’s not a guarantee if I’m staying in government employment.  The potential is greater in the private realm (but then I wouldn’t have PSLF).

7.  Based on the above, I think it is in our best interests to try to stick out PSLF jobs for the next 7-8 years (or longer), get tax-free PSLF, and move on with life from there.  (This, of course, assumes PSLF will work as planned, will still exist [along with the planet] in several years, etc.).

8.  If it’s in our best interest to stick in PSLF jobs, then I think it is also in our best interest to pay the minimum monthly payment now.  (That’s the point of sticking with forgiveness-qualifying jobs).

9.  If we want to pay as little as possible now per month, then a switch from IBR to REPAYE would drop our payments (IBR is 15% of AGI; REPAYE is 10% of AGI).  (This also simply a function of trying to find the most comfortable way to live day-to-day; having a kid, modest house, and other bills is expensive, and while we are surviving, more breathing room would be greatly appreciated, as it would be for anyone.)

10.  Our concern: if somehow down the line our income increases by an unforeseeably large amount, there will be no maximum amount per month that our monthly payments can rise.  If we stay on IBR, the most you’ll pay a month is whatever your 10-year, standard repayment would have been.  (Again, this is unlikely, but more likely if I switched to a private-sector employer.)

(a) Thus, my question: can you switch from REPAYE to IBR (or any other repayment plan)?

(b) Relatedly—based on the above, is there any reason why we would stay on IBR, rather than switch to REPAYE?

(c) If anyone has any other input/advice that I’m missing, I would certainly appreciate it.

Thanks!

If you’re payments get too high with REPAYE, just switch to the standard 10-year repayment plan, as that also qualifies for PSLF. In your scenario, while it is possible to switch from REPAYE to IBR, you probably wouldn’t be eligible for IBR because your income is too high. I believe that with REPAYE you do not have to certify your income or anything like that, but under IBR you have to qualify for a financial hardship, and submit income documentation every year. But, like I said, even though IBR is capped, why not just do the 10-year plan? You’d pay the same amount.

Also note, I’m not sure about REPAYE, but I do know that IBR is tricky to get out of, because you have to make an accelerated payment in order to do so (usually around 1 month of the standard 10 year repayment plan). I’m also quite sure that any interest will be capitalized when you switch plans.

It’s very complicated trying to run the numbers with that scenario.  You might find a free tool I created helpful: http://doceden.com/PSLFplanner.html.  Let me know if you’ve got any suggestions on how to make this tool better.

Good luck with your PSLF planning!