What is Income Based Repayment (IBR) ?

Income-Based Repayment (IBR) is a new way to make your federal student loan payments more manageable.  And if you’re a teacher or work in government or at a nonprofit (501(c)(3)) organization, you might qualify for a new type of public service loan forgiveness after 10 years of eligible payments and employment.

Am I Eligible?

Who can use IBR? IBR is available to federal student loan borrowers in both the Direct and Guaranteed (or FFEL) loan programs, and covers most types of federal loans made to students, but not those made to parents (click herefor more about qualifying loans). To enter IBR, you have to have enough debt relative to your income to qualify for a reduced payment. That means it would take more than 15 percent of whatever you earn above 150% of poverty levelto pay off your loans on a standard 10-year payment plan. Use our calculatorto see if you’re likely to be eligible.

How does IBR make payments more affordable? IBR uses a kind of sliding scale to determine how much you can afford to pay on your federal loans. If you earn below 150% of the poverty level for your family size, your required loan payment will be $0. If you earn more, your loan payment will be capped at 15 percent of whatever you earn above that amount. Except for the highest earners, that usually works out to less than 10 percent of your total income.

This chart shows examples of IBR payment caps as a percentage of the borrower’s family income, based on various incomes and family sizes.

What about interest? In some situations, your reduced payment under IBR may not cover the interest on your loans. If so, the government will pay that interest on your Subsidized Stafford Loans for your first three years in IBR. After three years and for other loan types, the interest will be added to the total amount you owe. While your debt may grow if your affordable payments are low enough, anything you still owe after 25 years of qualifying payments will be forgiven.

What are qualifying payments? The Department of Education has indicated that the following types of payments will count towards IBR’s 25-year forgiveness period, as long as you are in IBR at some point during those 25 years.

• Payments made in the Income Contingent Repayment plan (ICR) beforeJuly 1, 2009.
• All payments made on or after July 1, 2009 in the IBR, Income Contingent Repayment (ICR), and Standard (10-year) Repayment plans.
• Periods when the borrower has a calculated payment of zero in IBR or ICR (this occurs when your income is at or below 150% of the poverty level for your family size).
• Periods on or after July 1, 2009, when the borrower has been granted aneconomic hardship deferment.

Find out more about how to qualify for IBR.

Public Service Loan Forgiveness

Public Service Loan Forgiveness is a new program for federal student loan borrowers who work in certain kinds of jobs. It will forgive remaining debt after 10 years of eligible employment and qualifying loan payments. (During those 10 years, the Income-Based Repayment (IBR) plan can help keep your loan payments affordable.)

Who can get Public Service Loan Forgiveness? This program is for people with federal student loans who work in a wide range of “public service” jobs, including jobs in government and nonprofit 501(c)(3) organizations.

What are eligible jobs? In most cases, eligibility is based on whether you work for an eligible employer. Your job is eligible if you:

• are employed by any nonprofit, tax-exempt 501(c)(3) organization;
• are employed by the federal government, a state government, local government, or tribal government (this includes the military and public schools and colleges); or
• serve in a full-time AmeriCorps or Peace Corps position.

If you don’t meet these criteria, the Department of Education’s regulations create a two-part test of other circumstances under which you may still be eligible:

(1) your employer is not “a business organized for profit, a labor union, a partisan political organization, or an organization engaged in religious activities, unless the qualifying activities are unrelated to religious instruction, worship services, or any form of proselytizing;”

and,

(2) your employer provides any of the following public services: emergency management; military service; public safety; law enforcement; public interest law services; early childhood education; public service for individuals with disabilities and the elderly; public health; public education; public library services; and school library or other school-based services.

These definitions of eligible jobs reflect the Department of Education’s final regulations for PSLF, as posted in the Federal Register on October 23, 2008.

What kinds of loans does it cover? It covers federal Stafford, Grad PLUS, or consolidation loans as long as they are in the Direct Loan program. Borrowers with loans in the Guaranteed (or FFEL) loan program must switch to the Direct Loan program to get this benefit.

When does the 10-year clock start, and which payments count? Only payments made after October 1, 2007 count towards the 10 years (120 monthly payments, not necessarily consecutive) required for Public Service Loan Forgiveness. Qualifying payments are payments made through the William D. Ford Direct Loan Program in any of the following three repayment plans: the Income Contingent Repayment plan, the Standard (10-year) Repayment plan, and the Income-Based Repayment plan.

To count, these payments must be made while you’re working full-time in an eligible job. “Full-time,” according to the final regulations issued by the Department of Education, means an annual average of 30 hours per week or the standard for full-time used by the employer, whichever is greater. For people working part-time at two or more qualifying jobs, “full-time” means an annual average of 30 hours across all jobs held. In professions such as teaching, annual contracts that include at least eight months of full-time work will be treated as the equivalent of a full year’s employment. If you meet all the criteria, the earliest your remaining debt could be forgiven is October 2017.

How Do I Get It?

Contact your lender directly to apply for Income-Based Repayment (IBR). If your lender is the U.S. Department of Education, start here. If you do not know who your lender is, search the National Student Loan Data Systemdatabase.

What Does This Mean For Me?

• Lower Payments.
• After 25 years of payments, the balance is forgiven.
• If you work for a nonprofit, then after 10 years of service, payments are forgiven.

 

Needless to say, yours truly is on the hunt for a nonprofit job that I can telecommute to while maintaining my day job.  People, I can see the light! 

The Washington Post published the article Too Educated For Entry Level, and I was actually excited to see that they’d taken on this issue, especially here in the DC Metro area. With more women going to college and then going on to obtain master’s degrees, this is a relevant article for so many of us. Here in DC Metro, most of the women here in my circle are advanced degree holders, quite a few with multiple advanced degrees. Some are satisfied with their career paths, some are not. I am in the midst of my own career development in making the choices to set the path for the next 5 years so this article hit home for me.

Check out some of the more interesting quotes from the article:

“I can say there is some real truth to having a master’s or above hurting you in the job search — but only if you have less than three to five years’ experience,” said Kate Warren, a recruiter in the international development industry.

Warren said that many of her clients frown upon hiring candidates with graduate degrees for junior-level positions. “Those with the graduate degrees always expected higher compensation and had a higher sense of entitlement to the kind of projects and level of work they should be doing. Most of the junior-level positions tend to be very administrative — thus the day-to-day tasks do not require a master’s degree to perform well, but rather an organized, motivated individual.”

In some cases, it comes down to money. “Why hire a grad student for 40K-plus when you can hire a recent undergrad for 30K?” Warren said.

The real question that should be asked: why are masters level graduates competing with early career BAs for the same positions. Especially positions that are administrative in nature and do not require an advanced degree. I wish that graduate programs did a better job of giving students a realistic idea about what to expect with regards to ob prospects upon graduation.

“And it goes beyond just the salary. The recent undergrads actually tend to perform better, and stay in their job longer, than the master’s holders will. Obviously there are exceptions, but generally the B.A.-level employee will be much more eager to tackle the admin-level tasks . . . often required in this level of position. Generally speaking, master’s students come in with a somewhat inflated sense of abilities or just end up generally frustrated with the ‘mundane’ tasks they are asked to do.

There’s a common refrain among these workers, Warren said: “I went to graduate school, got myself into XX amount of dollars of debt to do this?”
“

This is a valid feeling by masters level graduates. They went to school in order to be engaged in a career that challenges their skill sets and abilities, not to be entrenched in a day job with menial and mundane tasks which have no relation to their advanced studies. Color me entitled.

So what do you do if you are willing to do the grunt work? How do you get employers to give your overeducated self a chance?

“I don’t advocate for leaving off their degree,” Warren said, “but I think it is important that they get across in a cover letter, and if it gets to this point, an interview that they are more than eager to roll up their sleeves. When hiring, I always appreciated when candidates were upfront that while they realized the day-to-day wouldn’t be the most glamorous of tasks, they were motivated by the fact that these are necessary steps in reaching the overall goals and missions of the organization.”

Here, Warren also sees a case for working a few years before pursuing a graduate degree. “If you go straight from undergrad to grad, you will be competing for jobs with recent undergrads — jobs [in] which your master’s will give you no edge and could actually be to your detriment.”

However, she said, people who take entry-level jobs out of college, work their way up and then head back to school will find that their graduate degree will be more valued.

I agree with these statements. I didn’t understand this at first, but it makes total sense now to work for a few years in order to decide what you want to do and get some experience under your belt. Good advice!

What do you think? Does having a Masters degree exclude you from certain entry level positions? From where I sit, the reality is that it does and I believe that graduate programs should do more in the way of helping students gain practical experience throughout their program so that when they graduate, they are a notch above the rest in terms of education and experience.

[image credit: CSU]

photo credit: Jessica DeWinter

Today will make two weeks since I quit my job. And while it was necessary to accommodate my busy schedule and to allocate more time to coursework, this involved revisiting our budget as we made the transition from a 2-income household to a one-income household.

This should be more of a test drive for us as we are planning to do this once we start having children. I plan to stay at home while my husband will continue working. We reviewed the budget and we planned for this last year when I took the job. The Internship requires 20-25 hours of unpaid time at a local site providing clinical services. I’m not all that hot about working for free for the remainder of the year but it must be done. I’m enjoying the placement and the experience thus far so this makes up for any issues with free work LOL!

Anyhoo, so we reviewed the budget and these are the things that we came up with:

Reduce Random Spending Habits

This is primarily my issue because I spend hours on Amazon.com, Ebay and other sites just cruising for crap to buy and I am so guilty. I can’t even tell what we’ve spent so far on random stuff but I have and its so sad. You know you’ve got to rein it in when you can’t recall what you spent money on within the last few weeks. Hubby isn’t much of a spender and so I’ve got to rein it in on my end. I’ve been good so far, cross your fingers.

Pay down or pay off credit card debt (significantly)

While reviewing our expenses we were trying to decide if paying off the credit card bill in its entirety was a good move vs paying it down to below 30%. We agreed on half because we are still rebuilding our savings since purchasing the house last year. More than likely we will pay off the whole thing once we move into the summer and hubby starts the new job. We did pay off the Dell account, which was $834 so, that’s step in the right direction. We took advantage of their 24 months same as cash promotion and paid the final bill last week. Makes no sense to rack up $400 in extra interest.

Kick Frugality into High Gear

Frugality is such a dirty word to some of you, I know, LOL! But I really enjoy it and even more now that I am aware of how much we spend on different things. When I realized how wasteful I’ve been in the past it really made me rethink money and what it means to us. Do I want to build wealth or just be able to spend at a moment’s whim?

Nix the Land line Phone

We don’t need it. And, with the bill hovering around $250 because we only have it so the alarm company can dial out, its time for it to go. That or stop using it or just get a standard plan. We’re a bit stuck on this because I like having a land line just because but with the basic service we pay higher fees if we actually use the phone than if we got a standard plan. We may end up keeping it but put the phone out of site. We have relatives that call the house when they can’t reach us on our cell phones and that’s going to have to stop.

Get Pet Insurance

Our cat, Scotch has been sick on and off over the last 6 months, and we just adopted another kitten, Max. Scotch’s vet bills are near $1000 so far and that’s out of pocket so I plan to ask the vet about how the insurance works, as I know this particular carrier takes all licensed vets into their program.

We are also benefiting from my not working by not having to drive into work, my internship site and then to class. I’d be paying for gas, and parking which would throw the budget out off because both are so expensive. Now I only pay for parking at the metro, which is a straight shot into my internship site and costs about $10/day. No more eating out for lunch and dinner since I get home so late, I actually have the time to bring a snack with me throughout the day, which cuts back on daily food spending.

Do you have any suggestions for us? What did you changed about your budget when cutting back on expenses?

photo credit: base2wave

I’ve spent the last few days or so thinking about my current career path, especially after this post where I noted my lack of a commitment to my career at this point in time. This brought about a slew of conflicting thoughts and feelings and I spent some time processing them because I’d never really given them much power, but the frustration is eating away at me daily, the closer I get to graduation.

As some of you know I am in graduate school finishing up a Masters in Counseling Psychology and Forensic Psychology, this is a dual degree program. The program had become a challenge of sorts over the last year due to the hoops I have to jump through in order to make sure that I’m on the right track to graduation which includes Internship and as you get closer to graduation, the classes you take require more self-disclosure which has always been an issue for me, none of which I will discuss here.

Current Resentments: Internship and Salary Prospects

Internship, not because of the place, but more so the the setup of it all. I love my placement, my supervisor and professor are awesome, mindful of boundaries, maintain a professional image and demeanor and are knowledgeable in their fields. I really really appreciate them because they are few and far between in this field. That said, I detest having to pay almost $2000 for a class AND work for a company for a year while getting nothing back in the ways of a stipend or hourly compensation. Some of us have had to quit our jobs just to make space in the day be able to do this and it has become utterly frustrating and I wish there was a way to change this, especially given the fact that we lose earning power while in graduate school since we can’t work FT, well most of us.

Speaking of earning power, this is my biggest bone to pick with the field. The type of work that we do helps people put their lives back together. This can be in the areas of family issues, substance abuse, supervisory conflicts, grief and loss etc etc. So when I see a large and successful organization with multiple contracts paying its counselors between $30-40k I am pissed. Those of us who are in this field, while we don’t do it for the money, we put our heart and minds into helping clients piece their lives back together. So, to see that the field after 3-5 years still hasn’t changed how much they pay counselors especially in light of the recession burns me up! I left a job as a Clinical Counselor paying $38k because I thought that with a graduate degree I could get paid much more than that. Well, come to find out I was getting paid as much as the other counselors with graduate degrees. Talk about a let down!

Decisions To Make: Passion, Purpose or Career?

I have some decisions to make regarding my pursuing my passion/purpose, or pursuing a career. There’s a difference and while some are blessed to be able to have both, I am still in limbo when it comes to answering this question.

My passion lies in working with women empower themselves towards self actualization. This is what I was meant to do in life and I have no questions about that. Where did this fit in with my career? Well I’ve spent the last 3-5 years working with female populations in the counseling field doing trauma work, counseling and financial empowerment.

This was the impetus behind Girls Just Wanna Have Funds when I bought the domain name a few years back. I wanted to dedicate my life to helping other women like me increase their feelings of self worth through financial empowerment. And, at the time I really enjoyed the counseling field and the work I did with the trauma population.

But now I question whether or not my intentions were financially motivated or purely for the love of the work. I don”t know but with my student loan payments hovering around $700 when I graduate $30-$40k won’t cut it.

So I plan to go back to school for the degree that I came to DC for in the first place. I won’t get into the specifics of why I left that program but it was stupid on my part and I should have checked things out before making a rash decision about my future. Am I making a rash decision about my future before even testing the waters? No, I’m just making plans just in case salary expectations are not fulfilled because the mortgage needs to be paid and I don’t plan on being broke after 2 Masters degrees.

Objectives

Talk to more people in intended career field

I’ve already started doing this and was invited my a local company in the field to do a paid internship with them but that would need to be towards the end of the summer as with my current internship, I don’t have the time. I plan to follow up with the contact there later this week.
Network with other companies and ascertain the value of my intended degree

I’ve already done this and have been told that this degree is potentially lucrative as I gain more experience. With my current degree I will hit a ceiling unless I am licensed and that will take 3-4 years and then I will still need to build a practice.

Research Flexibility and Corporate Culture

I’ve talked to one person so far and need to do a bit more of this as the application deadline nears. Flexibility and corporate culture are important because I don’t thrive well in cut throat situations, but I shouldn’t let that bother me because there will always be challenges in the office. I just need to make sure that wherever I end up after the completion of this new degree program I will be able to have some flexibility as I do have other interests and plan on having children. This is an issue I will expound upon in another post.

That’s it for now. Writing this post was therapeutic as I was able to get all my feelings down and potentially gain some feedback from others. I have been boiling for the last few days especially with my best friend making more than the counselors at my internship and she doesn’t have a Bachelor’s degree. I’m salty, I know. All of this has made me really question the value of a college and graduation, specific to my field, the behavioral sciences. I really am questioning the point of getting an education when it doesn’t really pay off more than if I’d just stayed home and worked. Then I question whether or not I would have met my husband and I wouldn’t change that for all the money in the world. So there are reasons why this is happening. At least I can say that I met the love of my life while on this journey, and I can still get into the career field that I originally planned for. Anyhoo, I’m rambling, thanks for reading as this wasn’t a scheduled post, but I wanted to share and receive feedback.

Have you changed careers? How old were you when you made the decision? Are you happy with the decision you made? Did you make the decision for the money or love of the field?