Why I don’t have Income Based Repayment

After I graduated and told anyone who would listen about my dire debt load, everyone casually and optimistically told me about IBR (Income Based Repayment). IBR caps your payment off at 15% of your discretionary income, so that payments are affordable and manageable based on your income and family size.

Many of my peers in grad school opted for IBR under the 25-year forgiveness plan, which states that if you make payments for 25 years under IBR, the rest of your loan balance will be forgiven. As this is new, there is some debate about how this will actually work, and whether people will get taxed based on their forgiven loan balance.

Based on my income, I am sure my payments would be pretty small and manageable. I have a friend who is unemployed and under IBR her payments are exactly $0 a month.

But I don’t want to be 53 years old when I pay off my student loans. I hardly want to be 30, but it looks like if I stay on task I can hopefully be debt free by 32.  Which requires me to pay about $1300/mo for the next three and a half years. HOLY WHAT?!

Sometimes it seems so overwhelming. As someone who loves travel, I always think of what trip I’d be going on if that money weren’t going to debt. It’s a terrible way to think and I’m trying to stop going down that path, but know that in a few years I will be truly free and I can accomplish all my financial and life goals.

Do you have student loans? What payment plan works for you?

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8 responses to “Why I don’t have Income Based Repayment

  1. I’m on IBR and I’ll probably stick with it for a long time since my degree is not exactly employable and I’ve never had a full time job. Even finding something part-time has proven difficult! $0 payments definitely help, especially when you have private student loans as well. It sucks.

  2. Well we all know I have massive student loans! 😛 I also have a hefty personal loan to take care of first, which should be paid off by end of 2013 and then I’m going to concentrate on putting any extra money towards debt repayment. I don’t know what that method would be called? Obessive-compulsive to be rid of debt maybe? 😉

  3. I live in Ontario, and we have a similar option called the Repayment Assistance Plan. It’s a great option to have because I only pay $200 or less a month towards my loan, and they “forgive” my interest – which would be nearly $400 a month otherwise (meaning my loan would actually be INCREASING every month – YIKES!). I of course wish I could afford to pay more then that, but I can’t. I would be hopeless without it!

    • I think IBR is a great option for people who genuinely can’t pay more than that. I feel like most people have some wiggle room in their budget and can pay more, but some circumstances simply don’t allow for that, so it is a life saver for that.

  4. I’m on IBR, and my payment is around $300/month. However, the government also pays about $250 of my interest a month for 3 years. Without my payment plan, my minimum payment would be about $2000/month, with $1100 of that interest only! With IBR, my minimum payment is divided between interest and principal. I pay about $800 extra each month directly into my highest interest rate (8.5%!!!!) and try to knock that out. Yes, interest continues to accrue each month, but I like the choice of paying only strictly interest, or chipping down my principal. Personal preference, i guess.

    • wow! I think IBR is a great option for you then. 2k per month?! UGH! I couldn’t pay that either, so I’d be in the same boat. I think having IBR and paying more if you can is a great idea.

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