Student loan deferment (pay, taxes, credit, income)

[OVERTAXEDNJ]

My wife recently finished graduate school and has over 100k in student loans. She was able to get a deferment on the federal loans due to "financial hardship". All she had to do was show her pay stubs from the job that she just started. Since she just started her income is low enough to qualify for the deferment.

My question is

A- will the loan people reevaluate her income again before the deferment date expires to see if she is making more money?

B- will trying to get her other loans deferred be more difficult if we file our taxes jointly since I make almost 90k per year?

We were thinking that if we file taxes separately then she will have a better shot of getting her other loans deferred but if we do that we will have to pay a lot in federal and even some in NJ state tax.

Any advice would be greatly appreciated. I have to let my tax preparer know if we want to file joint or separate.

[suzy_q2010]

Deferment just means the interest accumulates. In the long run, it costs more.

If you make 90K and she is also working, why do you want to defer repayment? Is an income based repayment plan perhaps better?

Income-Based Plan | Federal Student Aid

I suspect your CPA would really have liked for you to make this decision sooner than April 11!

[tmoua1]

Originally Posted by OVERTAXEDNJ

A- will the loan people reevaluate her income again before the deferment date expires to see if she is making more money?

B- will trying to get her other loans deferred be more difficult if we file our taxes jointly since I make almost 90k per year?

A. The Loan provider will not automatically reevaluate her income status. It's her/your responsibility to request an other deferment before the current one expires. At that point, yes, they will reevaluate her income.

B. Filing jointly or separately for income tax should not affect next years deferment evaluation since the Loan provider will only ask for proof of her income, not your tax return.

But as Suzy_q stated, an income based repayment plan is much better than deferment since interest accrues while in deferment. Will you both be able to service her school loan payments under the income based repayment plan?

[OVERTAXEDNJ]

It's only something temporary. We are in the process of buying a new house and our mortgage broker has to.d us that if the loans show as deferred it will help us get a more favorable mortgage approval for the amount that we want. Since she is just starting in her career her income is much less than it will be a year from now. If we were able to buy our house right now, none of this would even be a concern but we can't since we have to first sell our current home. It's probably likely that we won't sell before we are able to buy the new house.

[tmoua1]

The mortgage lender is looking at your monthly minimum obligations, which the school loan monthly payments contributes to and limits how much of a mortgage loan you'll qualify for. Regardless of deferring the loan or not, it will show up in your credit score which may affect the interest rate.

If saving up for the home purchase is not an issue, you can start paying the school loan once it comes due, and then apply for deferment when you're ready to buy - assuming you're wife's income still meets the threshold.