I need some student loan advice.
June 5, 2013 6:59 PM   Subscribe

How best to apply for income based repayment for student loans?

I have the following student loans on the standard repayment plan:

Direct loan

Balance: $10,047
Interest: 2.875%
Payment: $150

Stafford loans all serviced by Sallie Mae

Loan 1
Balance: $5309
Interest: 5.8%
Payment: $94

Loan 2
Balance: $783
Interest: 6.8%
Payment: $13

Loan 3
Balance: $1245
Interest: 4.8%
Payment: $22

Loan 4
Balance: $2893
Interest: 6.3%
Payment: $48

To apply for an adjusted payment for either one, I need to tell them how much I'm paying the other lender (Direct Loans wants to know my total monthly payments to Sallie Mae and vice versa.) So, assuming I apply for these at the same time I will tell Sallie Mae I send Direct Loans $150 a month and Direct Loans that I send Sallie Mae $177.

My question(s): If Direct Loans reduces my payment to $70, for instance, do I need to update that information with Sallie Mae? Will Sallie Mae then increase my payment based on that (hey, we cut you a break thinking you sent Direct Loans $150 a month, but it's really only $70, so now you owe us extra and are in trouble too)? And then assuming Sallie Mae reduces my payment, will that impact my newly reduced payment with Direct Loans? They check up on this stuff, right? I've done economic hardship deferment and I remember having to resubmit the paperwork periodically.

Furthermore, is it best to just apply to both lenders at once with my current payment information or one at a time? I assume their calculations are based on what I send the other lender but I'm never going to be able to pin down that number (?)

Bonus question: What does "approximate loan amount at repayment" mean?

posted by fozzie_bear to Work & Money (6 answers total) 3 users marked this as a favorite
This doesn't directly answer your question, but why don't you consolidate?

My suggestion would be to consolidate them, during the consolidation application you can select "IBR - Income Based Repayment" as a repayment option.

I had about 10 loans, consolidated, chose graduated repayment, and now only have 2 loans through Sallie Mae.

During consolidation is the only thing you need to worry about if you can't afford payments, as it can take a few months. However when I was consolidating, I couldn't make one of the payments to one of my lenders. I applied for temporary forbearance until my consolidation went through.

(Therefore paying nothing for a few months while the the consolidation was being negotiated between lenders.) Also by "applying" I said, "I can't pay this right now and am currently consolidating my loans. Can I be on forbearance for 3 months?" And they said yes, and that was that.

Closer to your question: I applied for income based repayment for one of my lenders during my consolidation period, and not the other lender. They knew I was already making payments to another lender, and it didn't seem to matter at all. During the time that income based repayment was being calculated, I was on forbearance. Again, I was still making payments to a separate lender without problems. It was through different lenders than you, but the only thing they wanted was my tax statements and pay stubs, it didn't matter how much I was paying to other lenders, so YMMV with your lenders. Really I would just call them, but again I suggest consolidation.
posted by Crystalinne at 7:20 PM on June 5, 2013

You can't consolidate private loans with Stafford loans, but ask Sallie Mae about consolidating your Stafford loans together and see what that may do to your payments. You may findit makes a decent difference.

Then apply for IBR with both lenders if it doesn't make enough of a difference. And only give them the info. asked for.
posted by zizzle at 7:54 PM on June 5, 2013

Best answer: Be very careful about consolidation. It could change your interest rates in a negative way, and could lose you various rights, depending on the particular consolidation. I would apply to both lenders for IBR at the same time using current payment numbers.
posted by shivohum at 8:55 PM on June 5, 2013 [1 favorite]

IBR can be a bit of a trap, too. We applied and qualified, and our monthly payment went down. However, your payment could conceivably go up as well. You also have to reapply each year. I was told if I didn't reapply that my monthly payment would double. Anyway, IBR is not entirely benign, so be careful.
posted by craniac at 7:01 AM on June 6, 2013

your payment could conceivably go up as well

The Direct Loans website has a calculator to determine what your payments will be under IBR.
posted by gerstle at 4:58 PM on June 7, 2013

Response by poster: Thank you all. I'm going to hold off applying until next month because Sallie Mae wants my "most recent month's pay stubs." Since I got three paychecks in May I'm concerned they would use that as an excuse to raise my payments.

I called Direct Loans (actually OSLA, who services them now) and "Aprox. loan amount at repayment" is the current pay off balance of the loan whereas "Loan Balance" is the amount that was initially dispersed, if anyone else is looking for that information.
posted by fozzie_bear at 12:58 PM on June 14, 2013

« Older The Happiest Drink in the World in NYC?   |   Does My Library's Bank Account Love Me or Hate Me? Newer »
This thread is closed to new comments.