IBR: Enroll now or later?

[sandstorm223]

Hello all,

Current resident here. I’m trying to decide when would be the best time to enroll in IBR for my federal loans. So far I haven’t done anything since the federal interest rate was dropped to 0%. In my mind this is free time that I’d like to use to invest that same amount of money monthly by maxing out my Roth IRA and buying some additional ETF stocks. However, people have been telling me that I should have already enrolled in IBR because I could be making essentially $0 monthly payments and still benefit from the 0% interest rate.

What have you all done? Are you enrolled in IBR during residency, or are you waiting until September to make full use of the 0% interest rate?

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[RangerBob]

Right now payments are suspended on all repayment plans, so you get $0 payments and 0% interest. Come Sept/Oct, interest rates go back up and your payments resume at whatever they were before (could be $0 if you had no income last year).

If you don't plan on pursuing PSLF then there's no need to bother, unless you're one of the very, very few people for whom the 25-year forgiveness plan makes sense. Because these $0 "payments" count towards those forgiveness plans.

I usually recommend REPAYE. If you have a large loan balance and no other income (ie., no high-earning spouse), then it has the potential to cut your interest rate almost in half. My effective interest rate as a resident was probably 4.5% or so.