Some general student loan questions

[SoonerTexan]

I thought about typing out some long thing about our particular situation, but I suspect the answer to much of it will be, "depends on X."

I do have some general questions, though. (all in regards to federal loans) I'd love it if anyone can help answer:

• When are federal loans sold to a servicer? Upon graduation? How do they notify you?
• What exactly is the 6 month grace period?
• Can I choose to forbear or pay on a year-to-year basis?
• Can I make lump sum payments on the principal only whenever I feel like it, or will that mess up a payment plan? (i.e. we decide we can throw a couple thousand at a loan but are currently forbearing. Will that disqualify us from forbearing further?)
• Are there any additional benefits to income-based repayment besides the obvious? (that it is based on your income) I seem to remember someone mentioning it benefited their interest situation positively when their income was low.

[poky]

I thought about typing out some long thing about our particular situation, but I suspect the answer to much of it will be, "depends on X."

I do have some general questions, though. (all in regards to federal loans) I'd love it if anyone can help answer:

• Are there any additional benefits to income-based repayment besides the obvious? (that it is based on your income) I seem to remember someone mentioning it benefited their interest situation positively when their income was low.

I don't know nitty-gritty details, but I think the other IBR benefit is that if you keep it up for 10(?) years, and are working at a public institution, anything left at the end of that time is forgiven? I'm sure someone will correct me if I have that wrong.

[scrub-jay]

Here goes. This is all from memory, so double check me.

• When are federal loans sold to a servicer? Upon graduation? How do they notify you?

http://studentaid.ed.gov/repay-loans...-loan-servicer

Ours were sold a little before graduation, DH was contacted via email and possibly also snail mail. You can always use the National Student Loan Data System (NSLDS) to identify the servicer. DH will need his PIN, same one used to apply to the FAFSA.

• What exactly is the 6 month grace period?

http://studentaid.ed.gov/repay-loans...a-grace-period

The 6 month grace period is granted to Fed student loan holders, the status will change from "In School Deferment" to "Grace" and during this time interest will not accrue on subsidized loans but will accrue on unsubsidized loans. See the above link for more details. Some recent legislation (7/1/2013) has changed when the interest will capitalize (be added to the principal) so it would be good to ask your servicer.

• Can I choose to forbear or pay on a year-to-year basis?

Yes. You have to renew either the forbearance (mandatory residency forbearance, not admin forbearance) or the payment plan annually, but you don't you can change at any time.

• Can I make lump sum payments on the principal only whenever I feel like it, or will that mess up a payment plan? (i.e. we decide we can throw a couple thousand at a loan but are currently forbearing. Will that disqualify us from forbearing further?)

Yes, this definitely should be possible. You'll need to talk to your servicer about where to send payments and what should accompany them (mine required a letter specifying the extra be applied to the principal for example and it was sent to a different address). This should NOT disqualify you from forbearance because you'd be asking for a mandatory residency forbearance which servicers are required to give you as long as you prove you are in a medical residency program.

• Are there any additional benefits to income-based repayment besides the obvious? (that it is based on your income) I seem to remember someone mentioning it benefited their interest situation positively when their income was low.

Short answer yes. The IBR-type plans are very detailed, I recommend reading about them. Also look into the less-known Pay-as-you-earn repayment plan, it is similar, but uses a lower % of income than IBR. The government will continue to pay the interest on subsidized loans while you have a financial hardship and qualify for IBR/PAYE, however, this only applies for the first 3 years. Also -- they technically only pay the interest that you don't cover with your (low) IBR payment. The trick here is that servicers apply your payment first to subsidized interest, thereby diminishing the benefit.

The IBR/PAYE plans also have the benefit of balance forgiveness if you continue in the program for a set number of years if you work in a NP (you'd really have to check the details on these) but they are also a cool benefit. You may be responsible for the taxes on the forgiveness balance.

http://studentaid.ed.gov/repay-loans/understand/plans

That should be a good start. The student aid site is very useful in starting to understand the subtle differences.

[MsSassyBaskets]

I don't know nitty-gritty details, but I think the other IBR benefit is that if you keep it up for 10(?) years, and are working at a public institution, anything left at the end of that time is forgiven? I'm sure someone will correct me if I have that wrong.

I believe this option is actually different from IBR and it is called "Pay As You Earn" but I could be wrong. Watching this thread with interest, we are right behind you, ST!

ETA: Cross-posted with scrub-jay-- thanks for clarifying!

[OrionGrad]

Some general student loan questions

To your last question about extra benefits of IBR, here is how I understand it (copied from finaid.org):
"The IBR program also includes a limited subsidized interest benefit. If your payments don't cover the interest that accrues, the government pays or waives the unpaid interest (the difference between your monthly payment and the interest that accrued) on subsidized Stafford loans for the first three years of income-based repayment. "

ETA: oops, I cross-posted too!

[MAPPLEBUM]

Here goes. This is all from memory, so double check me.

• When are federal loans sold to a servicer? Upon graduation? How do they notify you?

http://studentaid.ed.gov/repay-loans...-loan-servicer

Ours were sold a little before graduation, DH was contacted via email and possibly also snail mail. You can always use the National Student Loan Data System (NSLDS) to identify the servicer. DH will need his PIN, same one used to apply to the FAFSA.

• What exactly is the 6 month grace period?

http://studentaid.ed.gov/repay-loans...a-grace-period

The 6 month grace period is granted to Fed student loan holders, the status will change from "In School Deferment" to "Grace" and during this time interest will not accrue on subsidized loans but will accrue on unsubsidized loans. See the above link for more details. Some recent legislation (7/1/2013) has changed when the interest will capitalize (be added to the principal) so it would be good to ask your servicer.

• Can I choose to forbear or pay on a year-to-year basis?

Yes. You have to renew either the forbearance (mandatory residency forbearance, not admin forbearance) or the payment plan annually, but you don't you can change at any time.

• Can I make lump sum payments on the principal only whenever I feel like it, or will that mess up a payment plan? (i.e. we decide we can throw a couple thousand at a loan but are currently forbearing. Will that disqualify us from forbearing further?)

Yes, this definitely should be possible. You'll need to talk to your servicer about where to send payments and what should accompany them (mine required a letter specifying the extra be applied to the principal for example and it was sent to a different address). This should NOT disqualify you from forbearance because you'd be asking for a mandatory residency forbearance which servicers are required to give you as long as you prove you are in a medical residency program.

• Are there any additional benefits to income-based repayment besides the obvious? (that it is based on your income) I seem to remember someone mentioning it benefited their interest situation positively when their income was low.

Short answer yes. The IBR-type plans are very detailed, I recommend reading about them. Also look into the less-known Pay-as-you-earn repayment plan, it is similar, but uses a lower % of income than IBR. The government will continue to pay the interest on subsidized loans while you have a financial hardship and qualify for IBR/PAYE, however, this only applies for the first 3 years. Also -- they technically only pay the interest that you don't cover with your (low) IBR payment. The trick here is that servicers apply your payment first to subsidized interest, thereby diminishing the benefit.

The IBR/PAYE plans also have the benefit of balance forgiveness if you continue in the program for a set number of years if you work in a NP (you'd really have to check the details on these) but they are also a cool benefit. You may be responsible for the taxes on the forgiveness balance.

http://studentaid.ed.gov/repay-loans/understand/plans

That should be a good start. The student aid site is very useful in starting to understand the subtle differences.

She's got you answered pretty well here. I wasn't able to find anything about non profit, though if you teach in a title 1 school full time for 10 years your loans can be forgiven. It's after 25 years that your loans are forgiven on the IBR plan.

Something to remember, if you're planning to make loan payments throughout residency Forbearance is probably not your choice. Your interest continues to accrue throughout forbearance and capitalizes a few times a year.

As far as payments, mine have always been online so as long as you make your payment before the due date you can pay as much as you want.

Lastly, applying for one of the 5 payment options goes through studentloans.gov. If you filed taxes last year it is easier than you can ever imagine to compare the different payment options. This website can link to IRS so as long as you filed last year you could get the estimates within a couple minutes. I think you just have to remember your FAFSA Pin and other identifiers to log on.

[scrub-jay]

Ahh- another thing to note about the IBR plans: If you end up not working, you need to request "alternative documentation" for the income so that your earnings are not taken into consideration. If we used our previous tax document, it wouldn't be accurate and we wouldn't likely qualify for IBR so we would submit a recent pay stub instead along with any other income sources (dividends, whatnot). If you continue working, you may not have the financial hardship to qualify for IBR payments.

[Bittersweet]

If you continue working, you may not have the financial hardship to qualify for IBR payments.

You can also chose to file taxes separately in which case just your DH's income would be considered for IBR purposes. Just something else to consider.

[MAPPLEBUM]

You can also chose to file taxes separately in which case just your DH's income would be considered for IBR purposes. Just something else to consider.

This.

[ides]

If you want to do the loan forgiveness thing where you make 10yrs of payment while working for a public institution you can only consolidate with the plan associated with the program. So, check it out first before you consolidate! Once you are consolidated outside of the program you can never qualify for it again.

[scrub-jay]

You can also chose to file taxes separately in which case just your DH's income would be considered for IBR purposes. Just something else to consider.

Excellent point.