Case Study - Jennifer, a pharmacist chooses an IDR plan

Jennifer is getting married to John. They are expecting major life events- having a baby, buying a house, possible change in jobs or work hours- and want to have a strategy to save for retirement while managing Jennifer's pharmacy school debt.

Jennifer’s student loan balance is more than twice her income:

Jennifer’s annual income: $100,000 (John also makes $100,000)

Student loans: $250,000 (Direct Unsubsidized Loans, Grad PLUS loans @ 6%)

Jennifer wants to temporarily take time off from work or work part-time when she has a baby.

Jennifer’s question: 

“Is there a repayment strategy that allows for flexibility around changing life circumstances?”

Sample Strategy:

Enroll in an Income-Driven Repayment (IDR) plan.

How it works:

Jennifer has the flexibility to change her monthly repayment amount if she keeps her student loans in the federal system.  For example, if she enrolls in Pay-As-You-Earn (PAYE), her required monthly payments could start at $613.  However, Jennifer and John can choose to pay for their living expenses with John’s income and Jennifer can, for example, repay $4000/month for about 6 years to pay the entire loan balance. If Jennifer has a baby before the loan is paid off and decides to temporarily work part-time, and therefore, take a break from the $4,000/month payments to cover for extra baby expenses, she can request a recalculation of her minimum monthly payment.  Her monthly minimum payment could be as low as $223 if she is at a $60,000/year income level and files her taxes as “Married Filing Separately”.