Jan Miller: Yeah. The Repay Program is basically a better version of IBR. There’s already a better version of IBR called Pay As You Earn but that program is only for new borrowers. In other words, if your loans are too old, so to speak, then you don’t qualify for the Pay As You Earn program. Of course as we know most docs have been in school since the Stone Ages, so their loans are simply too old to qualify for that program whereas the Repay Program allows them, in many cases not all, to qualify for a lower payment on a 10 percent calculation without having to worry about the age of the loans. That’s the basic gist of it.
Josh Mettle: Got it. That makes sense. Let’s go just a little bit further here and do these new changes to the Repay Program, do they give us some clues or are you reading anything into some potential changes to the Public Service Loan Forgiveness Program and is there any correlation there that you can draw?
Jan Miller: Right, so now okay as it relates to the Public Service Loan Forgiveness question that the concern is – do I lose what I’ve already accumulated in qualified payments under IBR? If I switch to Repay, does it still qualify for public service. The answer is you got to keep all of your existing qualifying payments, so if you put 3 years in, at the lower payment on IBR and you qualify for the Public Service Loan Forgiveness program, you’ll only have 7 years left even if you switch to the Repay Program, so there’s no problem there. It does still qualify of course your payments under Repay qualify for the Public Service Loan Forgiveness as well. So there is no loss in benefits or qualification in that regard.
The difference is with the program is there are a couple of caveats to it that are important to understand. With the IBR program, first of all your payment is determined on your adjusted gross income, so if you are married, you have to include your spouse’s income, so that can dramatically raise your payment, right? Well, the IBR program has a little loophole to get out of that and you can file married separately, so then it only includes your income. That can be very beneficial to a lot of borrowers who have spouses who make a lot of money and can sometimes make too much money and disqualify for the program. All they need to do is file separately and they can exclude their income from their payment.
Well, the Repay Program doesn’t let you do that, so that’s the one caveat there. If you have a spouse that makes a significant income then the Repay Program’s benefit of 10 percent is going to be offset by the increased income of your spouse, so that’s something to be aware of. The other thing that gets a lot of attention is that there’s no cap on the Repay Program. What that means is under the IBR Program, your payment can only go so high basically equivalent to the 10 year standard payment.
With the Repay Program, your payment can go up and up and up as your income does. Well, you can see especially for a physician where that would be a drawback because they may start out at $50,000 a year in residency but jump to $250,000 a year when they go up to permanent position, right? Their payment can get greater and greater and greater with their income and it can kind of pay off more, majority of the loan before they reach the 10-year forgiveness that way. That’s a possibility. That’s one potential drawback. However, we’ll say that because of the 10 percent calculation often it takes so long to get to that cap that it’s not really relevant in many cases, but it can potentially eliminate any of the benefits of the program.
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