Federal Student Loan Forgiveness Options
Federal Student Loan Forgiveness Options
There are several loan forgiveness options available to borrowers with federal student loans, including the Public Service Loan Forgiveness (PSLF) program and income-driven repayment (IDR) plans.
Public Service Loan Forgiveness (PSLF) Program:
The PSLF program is a federal program that forgives the remaining balance on Direct Loans for borrowers who are employed full-time in a public service job and make 120 qualifying monthly payments under an IDR plan. To be eligible for PSLF, you must work for a government organization at the federal, state, local, or tribal level, or for a tax-exempt 501(c)(3) nonprofit organization.
Income-Driven Repayment (IDR) Plans:
IDR plans are repayment plans that base your monthly student loan payment on your income and family size. There are four IDR plans available:
- Revised Pay As You Earn Repayment Plan (REPAYE)
- Pay As You Earn Repayment Plan (PAYE)
- Income-Based Repayment Plan (IBR)
- Income-Contingent Repayment Plan (ICR)
Revised Pay As You Earn Repayment Plan (REPAYE):
Under REPAYE, your monthly student loan payment is based on your income and family size. If you have undergraduate loans, your payment will be 10% of your discretionary income, and if you have graduate loans, your payment will be 10% of your discretionary income. Your remaining loan balance may be forgiven after you make payments for 20 years (undergraduate loans) or 25 years (graduate loans).
Pay As You Earn Repayment Plan (PAYE):
Under PAYE, your monthly student loan payment is based on your income and family size. Your payment will be 10% of your discretionary income. Your remaining loan balance may be forgiven after you make payments for 20 years (undergraduate loans) or 25 years (graduate loans).
Income-Based Repayment Plan (IBR):
Under IBR, your monthly student loan payment is based on your income and family size. If you have loans that were disbursed before July 1, 2014, your payment will be 15% of your discretionary income. If you have loans that were disbursed after July 1, 2014, your payment will be 10% of your discretionary income. Your remaining loan balance may be forgiven after you make payments for 20 years (undergraduate loans) or 25 years (graduate loans).
Income-Contingent Repayment Plan (ICR):
Under ICR, your monthly student loan payment is based on your income, family size, and loan amount. Your payment will be the lesser of 20% of your discretionary income or the amount you would pay on a repayment plan with a fixed payment over the course of 12 years, adjusted according to your income. Your remaining loan balance may be forgiven after you make payments for 25 years.
Under an IDR plan, your remaining loan balance may be forgiven after you make a certain number of payments (typically 20 to 25 years, depending on the plan). However, any forgiven amount may be taxable as income.
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