Few things are more stressful than the uncertainty of income-driven repayment plans for student loans.
Imagine how your client feels when their financial health is tied to the government — every income change and new family addition affects their financial outcome. It’s hard to make informed decisions in this environment!
We want to help with that. Today we’re launching Payitoff Scenarios, a way to see how future life events affect your client’s income-driven repayment.
Let’s break down how it works.
Major Life Changes
Right now, we support two significant life scenarios:
- New Income
- New Family Member
When you are exploring an IDR timeline, you have the option to add any of these scenarios. Let’s look at an example.
Say your client is a soon-to-be doctor making $30k / year in residency. They’ve recently entered repayment and are expecting an income jump of $300k in 3 years. They’re on the Revised Pay As You Earn plan (REPAYE) and qualify for Public Service Loan Forgiveness.
Without the income jump, REPAYE looks like a good deal since the subsidies control the interest and the forgiven balance is far lower:
But once we add the future scenario, it becomes clear that REPAYE will ruin your client’s cash flow down the line:
Their monthly payment jumped from $106.02 to $2,587.18.
That’s insane! Since they’ve recently entered repayment, it might be a wise choice to move your client in a scenario with a monthly payment cap. How about when they enter PAYE?
Much better. This time, the monthly payment only jumped from $106.02 to $1,478.28. Now we have predictable cash flow and a lower total cost. In this case, PAYE is a clear winner.
We’re planning to introduce more life events down the line, but these two are definitely the ones that most significantly affect income-driven outcomes.
Give it a spin — we’d love to know what you think!