While there have been some snafus over the past month on my debt freedom journey it looks like I will be able to pay that debt off within the next couple of months. That basically leaves two major debts left: my student loans and my mortgage. The mortgage is something that I won’t be able to pay off in the next year or so (I wish) and I am currently on the debt forgiveness program for student loans. My conundrum at the moment is to figure out what to do next.
And then last week I had an important lesson taught to me about student loans. One of the reasons that I am on the debt forgiveness track is because Mrs. ROB has student loan debt as well. When you combine my wife’s student loans and my debt together we qualify for an income based repayment.
Income based repayment is a prerequisite for having any kind of student loan forgiveness, public or otherwise.
When you are on income based payments you need to renew them every year. It is a fairly simple process or so I thought. You go into your account at studentloans.gov. And you proceed to renew your income based repayment plan. They then transfer our income tax data to the application and then the application is processed and our payments will go up or down depending on how much money you have made for that year.
Well, we made a little more money than last year so I anticipated that our payments would go up. And it did. Mine went up a bid and my wife’s payment DOUBLED!
Now considering that we didn’t make that much money from last year this kind of through me for a loop. So I thought initially that I hadn’t renewed both of our income based repayment plans.
However, I checked and I had. So I was attempting to figure out why her payment had doubled. And here is the lesson I learned that any of you who are in on income based repayment plans PLEASE TAKE NOTICE.
When you renew your income based repayment there are basically four choices. You can file a new claim, just renew to your old plan or there are two other choices, which are key.
When I first renewed my wife’s plan I merely chose that I was renewing under the old plan. THAT WAS A MISTAKE.
So remember when I said that there are different income based repayment plans. Well there are four. You can read the guidelines here. But here is the important rub. One of the plans, the one which Mrs. ROB was under before, capped your payments at 15% of your disposable income. However, Congress created a new plan called REPAYE that went into effect in December of 2015. REPAYE caps your payments at 10% of your disposable income.
Considering that this was the first year that I was under income driven guidelines Mrs. ROB’s payments shouldn’t have doubled. My MISTAKE was that when I renewed our income driven payments I didn’t pick the new plan. I just thought it would pick the lowest one for us. WRONG!
So those of you who are doing income driven student loan payments and are renewing your plans MAKE SURE you check and choose the option when renewing where you can basically pick your plan or their is an option that says provide me the plan with the lowest repayment.
I have gone in and made these new changes, but the problem is that we might have to be stuck with this new payment for a month or two while Mrs. ROB’s application is processed. And no matter what her payment will go up from last year to this year. It just won’t double, at least I hope.
The Bottom Line: Make sure you check all of your options when dealing with student loans. I thought I knew what I was doing. Obviously not.