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

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

Post 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.

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UVA2B
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Re: LRAP/IBR/PSLF. How does it work? Let's find out!

Post 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.

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

Post 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.

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UVA2B
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Re: LRAP/IBR/PSLF. How does it work? Let's find out!

Post 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.

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

Post 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.

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UVA2B
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Re: LRAP/IBR/PSLF. How does it work? Let's find out!

Post 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.

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

Post 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.)

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

Post 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

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

Post 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.

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

Post 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.

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

Post by Nebby » Sun Aug 09, 2020 4:27 pm

While not completely clear, it's likely that Trump's EO won't provide qualifying payment status for those months being deferred after Sept. 30. PSLF is governed by statute and implemented through Dept. of Ed. regulations that were adopted via notice and comment, including what types of payments are "qualifying" for PSLF purposes. Ordinarily, suspension of payments (deferment or forbearance) do not count as "qualifying," unless some other legal authority defines them as such. The CARES Act smartly suspended payments and defined them as qualifying for PSLF purposes. Trump's EO doesn't mention PSLF or qualifying payments. Here's the text: https://www.whitehouse.gov/presidential ... -pandemic/

The EO only references deferring loans, which would make those months deferred not qualifying for PSLF. It sucks but for those on PSLF, I'd start making payments due after September 30th because they're likely not qualifying. Hopefully Congress is able to enact legislation that extends the CARES Act to make the months suspended count for PSLF. The Dept of Ed could also promulgate regulations to define deferred payments as qualifying, but that's unlikely to happen.

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

Post by Johannes » Sun Aug 09, 2020 10:53 pm

BeatricESQ wrote:
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.
Well don’t get off government repayment REPAYE/PAYE/whatever income contingent plan you’re on for anytime in the future. Trump exec order means no payments through end of the year and each payment count/. Election will be big time too now that there’s an exec order blueprint out for student loan payment forgiveness. I would recertify but now you gotta have 240 instead of 120 pay’ents. What’s debt load?

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

Post by Nony » Sun Aug 09, 2020 10:59 pm

Johannes wrote:
Sun Aug 09, 2020 10:53 pm
BeatricESQ wrote:
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.
Well don’t get off government repayment REPAYE/PAYE/whatever income contingent plan you’re on for anytime in the future. Trump exec order means no payments through end of the year and each payment count/. Election will be big time too now that there’s an exec order blueprint out for student loan payment forgiveness. I would recertify but now you gotta have 240 instead of 120 pay’ents. What’s debt load?
Did you read Nebby's post immediately above yours?

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

Post by Johannes » Sun Aug 09, 2020 11:09 pm

No I hadn’t gotten there yet. I disagree and think they will count. Trump is literally telling the agency how to do it.

It’s an APA question and there’s no clear law on this specific issue but I think forgiveness or not (or counting the payment) if done by the agency would be an agency action.

The statute CARES ACT made clear the agency had to count them as payments. They didn’t have any authority on the issue to fill the gap. Here there is a gap because there’s no law. It’s likely the agency can fill it however it chooses.

And I think they’ll fill it how the previous deferral worked.

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

Post by Johannes » Sun Aug 09, 2020 11:10 pm

Worst case scenario you don’t make 3 payments right now and they don’t count. I don’t see why you’d make 3 payments where a $0 payment might count.


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

Post by PSLF for me » Wed Sep 02, 2020 10:36 am

I work in government, and I’m really hoping to qualify for PSLF after just a few more years.

Is it safe to pay nothing on my loans until January 2021? Can I safely assume that DOE will properly implement Trump’s executive order on student loans?

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

Post by Nony » Wed Sep 02, 2020 11:03 am

All the student loan sites are saying that this is the case, so while they’re obviously not DOE and I can’t say for certain what DOE will ultimately do, I think borrowers would have really good arguments for detrimental reliance if DOE changes course (although I cannot believe I’m citing detrimental reliance with a straight face).

Personally I’m going to go with it, on the theory that it’s worth the risk that I might have to pay 3 months longer.

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

Post by Johannes » Thu Sep 03, 2020 10:54 pm

Yep just got my email from the dept of Ed confirming each $0 waived payment counts the same. Awesome!

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

Post by Johannes » Thu Sep 03, 2020 10:55 pm

PSLF for me wrote:
Wed Sep 02, 2020 10:36 am
I work in government, and I’m really hoping to qualify for PSLF after just a few more years.

Is it safe to pay nothing on my loans until January 2021? Can I safely assume that DOE will properly implement Trump’s executive order on student loans?
Yes. Dept of Ed is also an agency. Arbitrary and capricious and they have to follow their own guidance/positions. Can only change positions with a comment period etc.

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

Post by Nebby » Thu Sep 03, 2020 11:44 pm

Johannes wrote:
Thu Sep 03, 2020 10:55 pm
PSLF for me wrote:
Wed Sep 02, 2020 10:36 am
I work in government, and I’m really hoping to qualify for PSLF after just a few more years.

Is it safe to pay nothing on my loans until January 2021? Can I safely assume that DOE will properly implement Trump’s executive order on student loans?
Yes. Dept of Ed is also an agency. Arbitrary and capricious and they have to follow their own guidance/positions. Can only change positions with a comment period etc.
I don't think Ed is going to go back on it but an agency typically only needs notice and comment if the policy they are changing was implemented following notice and comment. An agency position policy doesn't have the same requirements for amending or rescinding as a regulation does. The exception apparently being If the position policy was in effect for long enough that people detrimentally relied on it (a la DACA).

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

Post by Johannes » Fri Sep 04, 2020 12:14 am

Yeah DACA is what I was getting at. I think we’re good regardless. Will opinion in my eyes.

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

Post by Guest » Fri Sep 04, 2020 3:49 am

Johannes wrote:
Thu Sep 03, 2020 10:54 pm

Yep just got my email from the dept of Ed confirming each $0 waived payment counts the same. Awesome!
I got an email from Fedloan, but not DOE proper. Was your email from DOE proper?

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

Post by Nony » Fri Sep 04, 2020 8:23 am

TBF, I’ve never received anything directly from DOE (including about the original forbearance through the CARES act). All communications come through the servicer.

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

Post by Johannes » Fri Sep 04, 2020 10:34 am

My email is from fed loan servicing, “an office of the US department of education” and also bears the dept of education insignia. I’d consider that from dept of education.

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