LRAP/IBR/PSLF. How does it work? Let's find out!

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Expand view Topic review: LRAP/IBR/PSLF. How does it work? Let's find out!

Re: LRAP/IBR/PSLF. How does it work? Let's find out!

by BeatricESQ » Tue Aug 04, 2020 7:30 pm

Thanks everyone for the help, I had lower than average law school debt and my PSLF eligible job had me close to six figures when I left so I don't think PAYE would make much sense for me.
I just didn't know if there was something I HAD to do immediately. I just need to go find a good financial advisor to help me in general figure things out. My parents aren't much help and it overwhelms me a bit. Since I assumed I would be PSLF forever that is the only thing I spent much time researching.
Thanks.

Re: LRAP/IBR/PSLF. How does it work? Let's find out!

by Hey_Everybody » Tue Aug 04, 2020 4:28 pm

My only point is that if you're paying roughly the same amount over the life of the loan, why not stretch that out over 20-25 years rather than 10? More money in your pocket now to have fun with, invest, buy a house, etc. UVA's point is valid in that it's a little more of a gamble, but I actually think it's still a fairly safe bet that most lawyers will be able to save up enough for the tax payment over the course of 20-25 years of their career. And if I'm wrong and there's a massive wave of people unable to pay their taxes because of PAYE/REPAYE my guess is that congress would have to take some action. But overall this is very subjective and seems mostly to be personal preference.

Re: LRAP/IBR/PSLF. How does it work? Let's find out!

by Kümmel » Tue Aug 04, 2020 4:10 pm

Nony wrote:
Tue Aug 04, 2020 4:03 pm
This is sort of a dumb question, but what would be the best vehicle for saving for a payment 20-25 years down the road that’s not a retirement fund?

If I had to pay off the total of my loans I’d rather just pay the first 10 years and be done than stretch it out for 20-25, but that’s obviously a subjective thing. (Also obviously not everyone will be able to make the 10 year payments. So I get doing it out of necessity, I just don’t get doing it if you can afford the 10 year payments.)

(I also don’t get the sort of implied expectation that Congress will get rid of the tax bill.)
Not a dumb question at all. People disagree. But probably some combination of CDs (certificates of deposits), HYSA (high yield savings accounts), and 20-year notes

Re: LRAP/IBR/PSLF. How does it work? Let's find out!

by Nony » Tue Aug 04, 2020 4:03 pm

This is sort of a dumb question, but what would be the best vehicle for saving for a payment 20-25 years down the road that’s not a retirement fund?

If I had to pay off the total of my loans I’d rather just pay the first 10 years and be done than stretch it out for 20-25, but that’s obviously a subjective thing. (Also obviously not everyone will be able to make the 10 year payments. So I get doing it out of necessity, I just don’t get doing it if you can afford the 10 year payments.)

(I also don’t get the sort of implied expectation that Congress will get rid of the tax bill.)

Re: LRAP/IBR/PSLF. How does it work? Let's find out!

by UVA2B » Tue Aug 04, 2020 2:07 pm

But in that scenario, you're still paying ~$200k over the life of the loan, with the only difference being you've stretched it out and you've been forced to regularly plan for that looming tax payment. And that includes a bunch of baked in assumptions on income growth and fixed costs over the life of the loan (or at least the ability to continue to absorb the cost of savings when you encounter increased costs of living that will almost inevitably happen in your life).

I'm not really saying any of that should/needs to scare someone away from using IBR/PAYE, etc., but just that you're shifting where the risks and strain of the loan are disbursed in your life. It wouldn't be the right choice for everyone for sure.

Re: LRAP/IBR/PSLF. How does it work? Let's find out!

by Hey_Everybody » Tue Aug 04, 2020 2:00 pm

OK, so you might have to save more like $7500 a year for the tax bill. Still seems significantly better than 10 year standard repayment to me. But I get that reasonable minds can differ.

Re: LRAP/IBR/PSLF. How does it work? Let's find out!

by UVA2B » Tue Aug 04, 2020 1:57 pm

I did some napkin/online calculator math based on $50k salary and 2% income growth and $145k loans at 5.7% weighted interest and got just over $300k forgiven.

Re: LRAP/IBR/PSLF. How does it work? Let's find out!

by Hey_Everybody » Tue Aug 04, 2020 1:51 pm

Sure, I might be. That part is kind of difficult to calculate and obviously depends how much income you have over those 20-25 years. It's possible that the loan balance could balloon more than I was anticipating. But the average law school debt is around $145k, so I tried to take some growth into account with my $200k scenario. And I think if you're truly indigent there's some sort of way out of paying the tax bill anyway.

Re: LRAP/IBR/PSLF. How does it work? Let's find out!

by UVA2B » Tue Aug 04, 2020 1:43 pm

Hey_Everybody wrote:
Tue Aug 04, 2020 1:17 pm
I guess what confuses me is that the tax bill doesn't seem that bad. Doing some very rough back of the envelope calculations, let's assume you had 200,000 forgiven. So you'd have a tax bill of roughly 100,000. But you'd have 20-25 years to save for that. If you put away like $5k a year for the inevitable taxes you're all good. Much better than paying like $3k a month on student loans for ten years. And that assumes you ever even have to pay the tax bill and congress doesn't just get rid of it.
Aren't you leaving out that the principle on what you've borrowed will have ballooned significantly in 20-25 years? $200k might not be that bad, but that would've started at a pretty small amount borrowed.

Re: LRAP/IBR/PSLF. How does it work? Let's find out!

by Hey_Everybody » Tue Aug 04, 2020 1:17 pm

I guess what confuses me is that the tax bill doesn't seem that bad. Doing some very rough back of the envelope calculations, let's assume you had 200,000 forgiven. So you'd have a tax bill of roughly 100,000. But you'd have 20-25 years to save for that. If you put away like $5k a year for the inevitable taxes you're all good. Much better than paying like $3k a month on student loans for ten years. And that assumes you ever even have to pay the tax bill and congress doesn't just get rid of it.

Re: LRAP/IBR/PSLF. How does it work? Let's find out!

by Cal Trask » Tue Aug 04, 2020 12:39 pm

Nony wrote:
Mon Aug 03, 2020 2:45 pm
Because people don't want 1) debt following them for 20-15 years (I can't remember which it is now), and/or 2) to pay the taxes on what gets forgiven.

I mean, I can see why people do it (and if PSLF fails maybe I will, too), but it's not perfect at all.
20 or 25 years depending on the program, but yeah that tax bill is the primary issue beyond paying.

Re: LRAP/IBR/PSLF. How does it work? Let's find out!

by Nony » Mon Aug 03, 2020 2:45 pm

Because people don't want 1) debt following them for 20-15 years (I can't remember which it is now), and/or 2) to pay the taxes on what gets forgiven.

I mean, I can see why people do it (and if PSLF fails maybe I will, too), but it's not perfect at all.

Re: LRAP/IBR/PSLF. How does it work? Let's find out!

by Hey_Everybody » Mon Aug 03, 2020 2:36 pm

Why does everyone hate on riding out REPAYE, even if you're not eligible for PSLF? Seems like that's definitely the right move unless you're in biglaw.

Re: LRAP/IBR/PSLF. How does it work? Let's find out!

by Kümmel » Mon Aug 03, 2020 2:31 pm

I mean you don't need 120 consecutive qualifying payments. Sounds like you had 30. you can return and get the other 90 at a later point in time and qualify. otherwise. assuming you were in an IBR plan and your debt negatively amortized, you can either now pay more than you would have to pay it all off, or you can do the johann and ride our REPAYE/PAYE

Re: LRAP/IBR/PSLF. How does it work? Let's find out!

by Nony » Mon Aug 03, 2020 2:22 pm

Not sure people in this thread who are relying on LRAP/IBR/PSLF are much help on what to do when you leave it for good. Pay off your loans I guess? I think you want some of the general finance threads.

Re: LRAP/IBR/PSLF. How does it work? Let's find out!

by BeatricESQ » Mon Aug 03, 2020 2:06 pm

Nony wrote:
Tue Jul 28, 2020 7:41 am
In what sense? Other than making sure that someone fills out the appropriate form so you can certify it was a qualifying job, there isn’t anything to do.
I mean when you leave it for good. I was 2.5 years in and left for private practice during the pandemic. I normally would be doing my annual certification pretty soon, my deadline is sometime in October.

Re: LRAP/IBR/PSLF. How does it work? Let's find out!

by Nony » Tue Jul 28, 2020 7:41 am

In what sense? Other than making sure that someone fills out the appropriate form so you can certify it was a qualifying job, there isn’t anything to do.

Re: LRAP/IBR/PSLF. How does it work? Let's find out!

by BeatricESQ » Tue Jul 28, 2020 1:56 am

Anyone have some solid advice on what to do when you leave PSLF jobs?

Re: LRAP/IBR/PSLF. How does it work? Let's find out!

by Nony » Sun Jul 26, 2020 9:18 pm

One of the JAG —> fedgov people over on TLS got it too.

Re: LRAP/IBR/PSLF. How does it work? Let's find out!

by Nebby » Sun Jul 26, 2020 9:07 pm

At least we know it's someone got it

https://twitter.com/sylvie_shaffer/stat ... 65475?s=19

Re: LRAP/IBR/PSLF. How does it work? Let's find out!

by Nebby » Wed Apr 01, 2020 2:16 pm

FYI all - the CARES Act (signed by the president on 3/27) makes some changes that affect PSLF.

In sum, everyone with federal loans will automatically go on forebearance until Sept 30, 2020. All monthly payments that would have qualified during this period will still be counted for PSLF purposes. This is a change to the ordinary rule that months on foreberance DO NOT count to PSLF. A friend of mine who works at DOEd posted about this and I double checked to ensure that is indeed the case. Below is the language from the CARES Act and a link to the page with the full law.
SEC. 3513. TEMPORARY RELIEF FOR FEDERAL STUDENT LOAN BORROWERS.
(a) In General.—The Secretary shall suspend all payments due for loans made under part D and part B (that are held by the Department of Education) of title IV of the Higher Education Act of 1965 (20 U.S.C. 1087a et seq.; 1071 et seq.) through September 30, 2020.

(b) No Accrual Of Interest.—Notwithstanding any other provision of the Higher Education Act of 1965 (20 U.S.C. 1001 et seq.), interest shall not accrue on a loan described under subsection (a) for which payment was suspended for the period of the suspension.

(c) Consideration Of Payments.—Notwithstanding any other provision of the Higher Education Act of 1965 (20 U.S.C. 1001 et seq.), the Secretary shall deem each month for which a loan payment was suspended under this section as if the borrower of the loan had made a payment for the purpose of any loan forgiveness program or loan rehabilitation program authorized under part D or B of title IV of the Higher Education Act of 1965 (20 U.S.C. 1087a et seq.; 1071 et seq.) for which the borrower would have otherwise qualified.

(d) Reporting To Consumer Reporting Agencies.—During the period in which the Secretary suspends payments on a loan under subsection (a), the Secretary shall ensure that, for the purpose of reporting information about the loan to a consumer reporting agency, any payment that has been suspended is treated as if it were a regularly scheduled payment made by a borrower.

(e) Suspending Involuntary Collection.—During the period in which the Secretary suspends payments on a loan under subsection (a), the Secretary shall suspend all involuntary collection related to the loan, including—
(1) a wage garnishment authorized under section 488A of the Higher Education Act of 1965 (20 U.S.C. 1095a) or section 3720D of title 31, United States Code;
(2) a reduction of tax refund by amount of debt authorized under section 3720A of title 31, United States Code, or section 6402(d) of the Internal Revenue Code of 1986;
(3) a reduction of any other Federal benefit payment by administrative offset authorized under section 3716 of title 31, United States Code (including a benefit payment due to an individual under the Social Security Act or any other provision described in subsection (c)(3)(A)(i) of such section); and
(4) any other involuntary collection activity by the Secretary.

(f) Waivers.—In carrying out this section, the Secretary may waive the application of—
(1) subchapter I of chapter 35 of title 44, United States Code (commonly known as the “Paperwork Reduction Act”);
(2) the master calendar requirements under section 482 of the Higher Education Act of 1965 (20 U.S.C. 1089);
(3) negotiated rulemaking under section 492 of the Higher Education Act of 1965 (20 U.S.C. 1098a); and
(4) the requirement to publish the notices related to the system of records of the agency before implementation required under paragraphs (4) and (11) of section 552a(e) of title 5, United States Code (commonly known as the “Privacy Act of 1974”), except that the notices shall be published not later than 180 days after the date of enactment of this Act.

(g) Notice To Borrowers And Transition Period.—To inform borrowers of the actions taken in accordance with this section and ensure an effective transition, the Secretary shall—
(1) not later than 15 days after the date of enactment of this Act, notify borrowers—
(A) of the actions taken in accordance with subsections (a) and (b) for whom payments have been suspended and interest waived;
(B) of the actions taken in accordance with subsection (e) for whom collections have been suspended;
(C) of the option to continue making payments toward principal; and
(D) that the program under this section is a temporary program.
(2) beginning on August 1, 2020, carry out a program to provide not less than 6 notices by postal mail, telephone, or electronic communication to borrowers indicating—
(A) when the borrower’s normal payment obligations will resume; and
(B) that the borrower has the option to enroll in income-driven repayment, including a brief description of such options.
https://www.congress.gov/116/bills/hr74 ... 748enr.xml

Re: LRAP/IBR/PSLF. How does it work? Let's find out!

by Nebby » Mon Feb 10, 2020 7:21 pm

twenty wrote:
Tue Mar 12, 2019 1:37 pm
It's that time of the year again!

https://www.marketwatch.com/story/the-t ... 2019-03-12
It's that time of the year again!

Re: LRAP/IBR/PSLF. How does it work? Let's find out!

by icechicken » Sun Dec 15, 2019 12:17 pm

archipm wrote:
Mon Dec 09, 2019 2:57 pm
idk if there was a different thread for different school's LRAPs but UChicago mildly improved theirs this year!
Yeah, looks like it's still positive-amortized (which makes it a little less awesome that clerkships and fellowships are covered) but in all other respects it seems comparable to the rest of the T6 now.

Re: LRAP/IBR/PSLF. How does it work? Let's find out!

by necho2 » Tue Dec 10, 2019 12:45 am

archipm wrote:
Mon Dec 09, 2019 2:57 pm
idk if there was a different thread for different school's LRAPs but UChicago mildly improved theirs this year!
+1

Also discovering that the whole "clerkships are covered" thing is not nearly as standard as I initially believed...

Re: LRAP/IBR/PSLF. How does it work? Let's find out!

by archipm » Mon Dec 09, 2019 2:57 pm

idk if there was a different thread for different school's LRAPs but UChicago mildly improved theirs this year!

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