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Can You Retain the RePAYE Interest Subsidy if You Prepay Your Loan?

Editor’s Note: This visitor post had been submitted by first-year resident and regular audience Wynton Overcast. A lot of you have got had the same concern and now because of the determination of Wynton, no further have actually to imagine during the upshot of prepaying your loan under RePAYE. As it happens the solution isn’t exactly just what We hoped or expected. Wynton and I also haven’t any monetary relationship.

An question that is unanswered May I Maintain The RePAYE Interest Subsidy if I Prepay My Loan?

After searching across the internet, WCI forum, Reddit and previous WCI articles, we finally reached off to Dr. Dahle as well as the WCI Team by having a question that is unanswered Can I pre-pay my student education loans while nevertheless attempting to use the RePAYE 50% Interest Subsidy? Constantly the instructor, Dr. Dahle provided me with the answer to the very best of their knowledge then again encouraged us to test that about it! Out myself and “send me personally a visitor post”

Establishing the phase

Let’s set the phase a tiny bit. I will be a year that is first with

$150k of student education loans at mortgage loan of 5.5% and my loan company is FedLoan Servicing. We joined the RePAYE plan this summer time and as a result of my pupil status and my wife’s relatively lower earnings year that is last our expected payments for the following 12 months under this plan are $0…. Which ensures that i’ll be obtaining the full 50% interest subsidy through the federal government and a successful rate of interest of 2.75per cent.

( crucial Note: we won’t be choosing PSLF as time goes on, so we will have to eliminate this debt at some time on our very own. If you’re choosing PSLF it’s wise to create as numerous tiny repayments as you are able to for the 120 required payments and you ought ton’t even think of prepayments. )

Why also fuss about making very very early re re payments towards the loan with such a reduced effective rate of interest? Continue reading