I have about $28,000 in subsidized/unsubsidized student loans. I graduated in May 2017 and will need to start paying them back in January 2019. I looked into the repayment options and am considering the REPAYE option. Currently, my income is $40,000 and they are estimating my monthly payment would be $60 (versus $286 which it is now).
I see that the loan could be forgiven in 20 years with consistent payments. I think it also says my monthly payment will never go above the original amount of $286.
I'm wondering what the catch is? As I understand it, it sounds like I would save money in the long run, as long as the loan is forgiven after 20 years. Does this option greatly decrease the amount I will have to pay back or am I missing something? Thank you for any help! Carol
The catch is the government is banking on you getting pay raises, which would raise your payment, which would in turn lower or eliminate the amount forgiven.
Your starting salary is $40,000, and it won't likely stay there.
When I did the math, I never saw a repayment at $60 per month (based on $28,000 loan and $40k income, and family size of 1 assuming you're single). It was $182 per month, and you had no projected forgiveness (meaning the loan would totally be paid off in 162 months).
If you stayed on the standard plan at $286, you'd pay the loan off 3 years earlier, and save about $6k in interest.
Thanks for your reply. I used NelNet.com and $60 per month is the estimate they gave me (see attached). It does seem low. What site did you use? Was the $182 you used based on the REPAYE option? Thanks for your help!
I'm wondering if Nelnet has the wrong information -- their site says you can choose from up to 20 years to repay if you're on an income-based repayment plan (see attached)? From the Studentloan.com site, it says REPAYE is 138 months.
I always use the repayment estimator on StudentLoans.gov. The reason for the gap is that it estimates your income will rise, and you'll pay off the loan in 138 months - before you receive any forgiveness.