I used a five-year loan with an average interest rate of 3% in the analysis. Private refinancing is cheaper than it appears. If the second tab is the executive summary, the third tab is the engineer's meaty technical report. If I scroll all the way over to the right of it, I can watch how fast the loan balances decline with the various repayment options. In looking at the columns entitled "Salary excluding 150% of Fed Pov Line," I can observe the growth of our discretionary income as defined by each plan. However, it allows me to see how much my girlfriend's monthly payments will be under different plans. I do not need to enter anything or change anything in this tab. The third and final 'Simulation' tab is the back end that makes the spreadsheet work. All of the other options would cost at least $10,000 more. The two best options to us were PSFL and private refinancing.
We checked with her loan servicer to make sure she was not eligible. I decided to include it in the spreadsheet just in case. Unfortunately, my girlfriend does not qualify for the PAYE plan because she had loans before October 2007. After 120 qualifying payments, we could apply for tax-free forgiveness for the balance of the loan. Public Service Loan Forgiveness (PSLF) requires us to sign up with one of the four major options. Finally, if we chose the Standard plan, she would just pay the monthly payment that would have resulted in complete payback of her original loan balance within 10 years.If we chose the PAYE plan, her monthly payment would only be 10% of her income.Since all her loans predate 2014, she would be on the old IBR plan that charges 15% of income. The IBR program is either 10% or 15% of discretionary income depending on the year of her loan issuance.REPAYE would have no cap on her monthly payments, which would be 10% of her discretionary income.
There are four main repayment programs within the federal student loan program: I highlighted the most expensive repayment option in red, and I highlighted the cheapest option in green.