Hi Heather,

I’m about to start making payments under the IBR with the hope of having my loans forgiven by PSLF in 2021.  My problem lies in the eventual disqualification for IBR and what happens then.  I understand payments under the 10-year plan also qualify for PSLF.  Here’s my question:

Right now I make $75,000 with loans of $120,000+ so I qualify.  But eventually….closer to the 6 to 10 year marks, my salary will likely be more than my loans as my salary increases and loans gradually decrease due to payments.

So when I’m no longer qualified for the IBR and have to switch back to the 10-year plan to make my remaining payments, when the 10 year period calculated for payment purposes?  Is it from the day I switch from IBR to the 10-year plan, taking whatever I have left to pay and amortizing it for 10 years from the switch day?  Or does that 10-year clock run from when I first went into repayment a year ago?  The latter would mean my payments would be MUCH larger than if I was on the 10-year plan the entire time because I’ll be paying much less under the IBR until the switch date and much of my loans will be left over.  The former would be much better because although my payments would increase above my IBR payments, it wouldn’t be a horrific jump.

Thank you for your help.

The Department of Education says that even if a borrower has a substantial jump in income, and no longer has a Partial Financial Hardship, they may remain in IBR if they choose, but will be required to pay the amount they would have been required to pay under a 10-year Standard Repayment based on the amount of eligible loans that were outstanding when the borrower began repaying under IBR.  So borrowers who no longer have a Partial Financial Hardship but stays in IBR will pay the amount they would have paid if they had chosen the standard 10 year repayment term in the first place.  The maximum amount you could pay under IBR is the amount you would have paid under the standard 10-year plan.  Your repayment period based on this recalculated amount will depend upon whether and when you earn PSLF and may be more than 10 years, but not more than 25 years in all.

Borrowers may also choose to leave IBR.  And borrowers who elect to leave IBR (whether or not they stopped having a PFH) will have different options depending on whether the loan is a consolidation loan or not. For borrowers who CHOOSE to leave IBR, the post IBR repayment term will differ depending on whether the loan is a consolidation loan with a “standard” repayment term of 15-30 years depending on the balance at consolidation, or a non-consolidation loan with a 10-year standard term.

Check out the Dept of Ed’s Q#15 on the IBR FAQs: http://askheatherjarvis.com/uploads/images/IBRQ&A_template_123109_FINAL.pdf