IBR + PSLF woes Forum

[krads153]

Just began my third year of PSLF-eligible payments. Currently making $65,000 a year while carrying a loan balance of $185,000. It brings about this incredible tightness in my chest every time I even think of PSLF going away in the next eight years. It also brings about a tightness in my chest every time I think about actually applying for forgiveness even if the program is still around. What if I made some small mistake over ten years that made me ineligible? What if they have a problem verifying the government employer that I had for the first two years out of law school? PSLF really isn't the sigh of relief that I thought it would be; I'd almost rather deal with the stress of biglaw and avoid the stress of loans than deal with the stress of loans and avoid the stress of biglaw (I still work 50-60 hour weeks anyway because lol bigfed).

At least I have Great Lakes as my servicer, though. I've never had a problem with them that was even close to the FedLoan horror stories here.

Not on point, but what the... is this normal?

But yes, having loans is super stressful. I started out with big loans - I remember thinking about them constantly. Shit is much harder than it looks as a 0L.

It seems to be normal among litigating attorneys. Non-litigating attorneys seem to have cushy 40 hour gigs, though.

And yeah, as a 0L, it's like, "oh, that debt is basically in Monopoly money if I know it's going to be forgiven." Did you end up going into biglaw and paying yours off?

Yep, I went into biglaw and paid them down (although I am generally jealous of fed gov attorneys to be honest).

I was lucky that my spouse had no loans, or else we would have been super fucked. I hear of some couples who graduate with like 500k debt or more combined - it's all cray cray to me.

[timbs4339]

FLS is the worst of the worst. The entire system is set up for you to just get discouraged and stop trying. Good for you OP for fighting.

You should post this in the choosing forum so applicants can see that it's not "just put the debt on IBR/PSLF and forget about it for 10 years" schtick.

[krads153]

FLS is the worst of the worst. The entire system is set up for you to just get discouraged and stop trying. Good for you OP for fighting.

You should post this in the choosing forum so applicants can see that it's not "just put the debt on IBR/PSLF and forget about it for 10 years" schtick.

Moderator - can we move this?

[jess]

.

[Nebby]

This thread reminded me to check who my fed loan servicers are, and thankfully they're all (UG and law school) with Great Lakes

[A. Nony Mouse]

Yeah, I got that "standard repayment plan" payment for one month thing, too, to switch to REPAYE. I need to call them about the stupid forbearance month. As I understand it, you can change your plan at any time, and the "do a reduced payment of at least $5" is somewhere in the application, but it's really easy to miss (I nearly did).

[Anonymous User]

In February I applied to change from IBR to REPAYE so I could reduce my monthly payment from about 440 to about 280

last night I got emails from FedLoanServicing. So naturally I thought cool, they must have finally processed my REPAYE application.

I open the emails and see that I have been placed on administrative forebearance for April and that I have a $3000 loan payment due on May 19.

Currently on hold to try to figure out WHAT THE FUCK IS GOING ON

I called them and eventually resolved the situation

apparently when you switch out of IBR to any other repayment plan you are required to make one "standard payment plan" payment. Standard meaning not income based. For me that's about 3k. Apparently there was an option of doing a "reduced payment" instead of the standard payment. I did not select that option because I wanted to keep making as many qualifying payments for PSLF purposes. I assumed that my switch from IBR to REPAYE would be seamless because I can't see any reason why it shouldn't be.

So anyway, they put me on forbearance for April and in May I will make a reduced payment of $5 and then REPAYE starting in June.

The downside is that I am not 2 months away from PSLF than I was expecting to be. Not a huge deal but still annoying.

Wait... what!?? This is absurd. Where did you go to sign up for REPAYE? And can you do it at any time or do you do it during the recertification period?

I honestly don't know whether you can or cant change it at any time. My intention was to change it back in January but they told me it wont switch until May when my IBR was up for re-certification.

These rules DO NOT MAKE SENSE. To be fair to FedLoan though, I'm sure the law is mostly to blame re: this shit.

also it's borhas sorry for posting anon by mistake again

you can sign up for REPAYE at studentloans.gov

[dixiecupdrinking]

Imagine dealing with this crap if you DIDN'T have a law degree. At least all that money you borrowed went to learning how to negotiate tedious technicalities.

[Borhas]

Imagine dealing with this crap if you DIDN'T have a law degree. At least all that money you borrowed went to learning how to negotiate tedious technicalities.

I can say with certainty that my law degree did not do dick

I mean if I actually sat down and read all this shit I agreed to I probably would have eventually learned about the one time standard repayment thing, but 1) I am in no position to negotiate with the US government over my student loans and 2) who the fuck has time for that?

[FlanAl]

So I'm running late on my taxes here but do we get to pretty much deduct everything we pay towards the loans? Like a few of us basically everything I contributed went towards the interest on my loans. If that's all deductible that would be pretty helpful and quite frankly pretty helpful over the next 10 years. Thanks, and again, super thankful for this thread

[Tanicius]

So I'm running late on my taxes here but do we get to pretty much deduct everything we pay towards the loans? Like a few of us basically everything I contributed went towards the interest on my loans. If that's all deductible that would be pretty helpful and quite frankly pretty helpful over the next 10 years. Thanks, and again, super thankful for this thread

Far as I'm aware yes, provided it wasn't paid for you by an LRAP org.

[yips]

For someone who is still at the same job they started, it would make no sense to send it in in this situation. But for me specifically, I switched to a different federal agency so it makes sense to send in the form now rather than have to get employment verified by a place that I no longer work at in six years. But I figure it'll be less pain than switching servicers.

Just wanted to say (for anyone who might be confused like I was) that you can get the form signed when you change employers, keep the form until your 120 payments are up, and then submit all of your certifications at the end. This way, you don't have to switch servicers prematurely, and you won't have to backtrack to previous employers years after the fact when you eventually do qualify for PSLF. Obviously, this means having additional pieces of paper to keep track of for years, but it's a decent solution.

[Nebby]

So I'm running late on my taxes here but do we get to pretty much deduct everything we pay towards the loans? Like a few of us basically everything I contributed went towards the interest on my loans. If that's all deductible that would be pretty helpful and quite frankly pretty helpful over the next 10 years. Thanks, and again, super thankful for this thread

Far as I'm aware yes, provided it wasn't paid for you by an LRAP org.

It's there a cap on the amount of interest paid we can deduct?

ETA: yes, it's $2500 https://www.irs.gov/taxtopics/tc456.html

[GreenEggs]

So I'm running late on my taxes here but do we get to pretty much deduct everything we pay towards the loans? Like a few of us basically everything I contributed went towards the interest on my loans. If that's all deductible that would be pretty helpful and quite frankly pretty helpful over the next 10 years. Thanks, and again, super thankful for this thread

Far as I'm aware yes, provided it wasn't paid for you by an LRAP org.

It's there a cap on the amount of interest paid we can deduct?

I believe $2500

https://www.irs.gov/taxtopics/tc456.html

[Nebby]

So I'm running late on my taxes here but do we get to pretty much deduct everything we pay towards the loans? Like a few of us basically everything I contributed went towards the interest on my loans. If that's all deductible that would be pretty helpful and quite frankly pretty helpful over the next 10 years. Thanks, and again, super thankful for this thread

Far as I'm aware yes, provided it wasn't paid for you by an LRAP org.

It's there a cap on the amount of interest paid we can deduct?

I believe $2500

https://www.irs.gov/taxtopics/tc456.html

Scooped u bruj

ALSO, LRAP payments towards interest can be deducted as well. See https://www.irs.gov/publications/p970/c ... 1000178271

[GreenEggs]

ALSO, LRAP payments towards interest can be deducted as well. See https://www.irs.gov/publications/p970/c ... 1000178271

Now that's beautiful.

What would be more beautiful is if CLS's LRAP's AGI was the AGI on your income tax return (after deductions).

[Tanicius]

ALSO, LRAP payments towards interest can be deducted as well. See https://www.irs.gov/publications/p970/c ... 1000178271

Now that's beautiful.

What would be more beautiful is if CLS's LRAP's AGI was the AGI on your income tax return (after deductions).

You guys, no, it's not that simple.

You have two options:

1. No deduction reported, no LRAP loan reported as income.

2. Report the deduction for a tax return, AND report the LRAP loan as income.

IRS Example: Darla obtained a qualified student loan to attend college. After Darla's graduation from college, she worked as an intern for a nonprofit organization. As part of the internship program, the nonprofit organization made an interest payment on behalf of Darla. This payment was treated as additional compensation and reported on her Form W-2, box 1. Assuming all other qualifications are met, Darla can deduct this payment of interest on her tax return.

[Nebby]

ALSO, LRAP payments towards interest can be deducted as well. See https://www.irs.gov/publications/p970/c ... 1000178271

Now that's beautiful.

What would be more beautiful is if CLS's LRAP's AGI was the AGI on your income tax return (after deductions).

You guys, no, it's not that simple.

You have two options:

1. No deduction reported, no LRAP loan reported as income.

2. Report the deduction for a tax return, AND report the LRAP loan as income.

IRS Example: Darla obtained a qualified student loan to attend college. After Darla's graduation from college, she worked as an intern for a nonprofit organization. As part of the internship program, the nonprofit organization made an interest payment on behalf of Darla. This payment was treated as additional compensation and reported on her Form W-2, box 1. Assuming all other qualifications are met, Darla can deduct this payment of interest on her tax return.

Depends on how your lrap is set up. CLS' is set up as a forgivable loan. They send us a check, which is the loan disbursement, and we can do whatever we want with the money. Next, we make our student loan payment with either the funds from the loan, funds that are both the LRAP loan and other funds, or our own funds not using the LRAP loan disbursement. It's not considered income because it's a loan, and it's not like the above example because they aren't paying it on our behalf. They're loaning us money directly, and then we pay it on our behalf.

[GreenEggs]

ALSO, LRAP payments towards interest can be deducted as well. See https://www.irs.gov/publications/p970/c ... 1000178271

Now that's beautiful.

What would be more beautiful is if CLS's LRAP's AGI was the AGI on your income tax return (after deductions).

You guys, no, it's not that simple.

You have two options:

1. No deduction reported, no LRAP loan reported as income.

2. Report the deduction for a tax return, AND report the LRAP loan as income.

IRS Example: Darla obtained a qualified student loan to attend college. After Darla's graduation from college, she worked as an intern for a nonprofit organization. As part of the internship program, the nonprofit organization made an interest payment on behalf of Darla. This payment was treated as additional compensation and reported on her Form W-2, box 1. Assuming all other qualifications are met, Darla can deduct this payment of interest on her tax return.

I don't know, so you might be right, but that example doesn't seem comparable. The internship organization is making the payment and Darla doesn't have to pay them back if she quits the next day. With LRAP, if you quit the day after receiving the 6 month loan, you need to pay it back. Does that change anything?

eta: scooped

[Tanicius]

ALSO, LRAP payments towards interest can be deducted as well. See https://www.irs.gov/publications/p970/c ... 1000178271

Now that's beautiful.

What would be more beautiful is if CLS's LRAP's AGI was the AGI on your income tax return (after deductions).

You guys, no, it's not that simple.

You have two options:

1. No deduction reported, no LRAP loan reported as income.

2. Report the deduction for a tax return, AND report the LRAP loan as income.

IRS Example: Darla obtained a qualified student loan to attend college. After Darla's graduation from college, she worked as an intern for a nonprofit organization. As part of the internship program, the nonprofit organization made an interest payment on behalf of Darla. This payment was treated as additional compensation and reported on her Form W-2, box 1. Assuming all other qualifications are met, Darla can deduct this payment of interest on her tax return.

Depends on how your lrap is set up. CLS' is set up as a forgivable loan. They send us a check, which is the loan disbursement, we use it to paying our payment. It's not considered income because it's a loan, and it's not like the above example because they aren't paying it on our behalf. They're loaning us money directly, and then we pay it on our behalf.

Forgiven private loans are of course income. If you're reporting interest deductions but not the fact that a school basically gave you $5,000 in December by forgiving a loan, you are a double dipping and you will probably get in trouble with the IRS if they find out about that.

[GreenEggs]

Forgiven private loans are of course income.

Didn't know that, thanks.

[Tanicius]

Looking this over, I'm actually beginning to fear that we may be REQUIRED to report our LRAP forgiven loans and simply ask for the forgiven interest. If true, this would really suck, because it looks like my salary and "married filing separately" status basically disqualify me from any interest deduction on my taxes. That's about $5,000 extra from my forgiven LRAP loan that I may now have to report as income. Originally, I thought it was fine to just not report the deduction on my tax return if I'm not reporting my LRAP loan either, because I figured the finances would be a wash either way. But it seems that I'll probably owe money under the first of the two options, so it wouldn't be a wash at all.

Sigh. Time to call my accountant.

[Nebby]

Looking this over, I'm actually beginning to fear that we may be REQUIRED to report our LRAP forgiven loans and simply ask for the forgiven interest. If true, this would really suck, because it looks like my salary and "married filing separately" status basically disqualify me from any interest deduction on my taxes. That's about $5,000 extra from my forgiven LRAP loan that I may now have to report as income. Originally, I thought it was fine to just not report the deduction on my tax return if I'm not reporting my LRAP loan either, because I figured the finances would be a wash either way. But it seems that I'll probably owe money under the first of the two options, so it wouldn't be a wash at all.

Sigh. Time to call my accountant.

Go look up the law. I cannot find any definition of income for purposes of the federal income tax where a loan is considered income for tax purposes.

I honestly cannot even conceive how you're coming to these conclusions.

[GreenEggs]

https://www.irs.gov/taxtopics/tc431.html

In general, if you have cancellation of debt income because your debt is canceled, forgiven, or discharged for less than the amount you must pay, the amount of the canceled debt is taxable and you must report the canceled debt on your tax return for the year the cancellation occurs.

EXCEPTIONS:

Certain qualified student loans canceled under the loan provisions that the loans would be canceled if you work for a certain period of time in certain professions for a broad class of employers

I guess that includes LRAP

[Tanicius]

Looking this over, I'm actually beginning to fear that we may be REQUIRED to report our LRAP forgiven loans and simply ask for the forgiven interest. If true, this would really suck, because it looks like my salary and "married filing separately" status basically disqualify me from any interest deduction on my taxes. That's about $5,000 extra from my forgiven LRAP loan that I may now have to report as income. Originally, I thought it was fine to just not report the deduction on my tax return if I'm not reporting my LRAP loan either, because I figured the finances would be a wash either way. But it seems that I'll probably owe money under the first of the two options, so it wouldn't be a wash at all.

Sigh. Time to call my accountant.

Go look up the law. I cannot find any definition of income for purposes of the federal income tax where a loan is considered income for tax purposes.

My CPA (I have an uncle-in-law... couldn't afford him on my government salary, ha) believes it is definitely income, and he is not convinced by the speculative Berkeley Law FinAid blog that postulated in 2012 that forgiven LRAP loans are not income. There's a special exception for *medical field* LRAP programs, but not for law or government:

https://www.irs.gov/publications/p970/ch05.html