Debt got you down?
Here are some new options for repaying federal student loans—or eliminating debt altogether.
Pay As You Earn: To be eligible for Pay As You Earn, you must have taken out your first federal loan after September 30, 2007, and you also must have received a loan after September 30, 2011. (The plan is targeted to recent graduates.) Another requirement: You must also owe more than ten percent of your discretionary income. Payments will be capped at ten percent (lower than other repayment plans). As income rises, payments grow larger. A drop in discretionary income will likely mean a drop in payments.
The Income Based Repayment Plan: A precursor to Pay As You Earn, this program is also for federal loan holders, including Subsidized and Unsubsidized Direct and Stafford Loans. Payments will never exceed 15 percent of income. Most borrowers in IBR plans will have their loans forgiven after 25 years, but public school employees will likely end their repayments sooner, thanks to the Public Service Loan Forgiveness Program.
The Public Service Loan Forgiveness Program: following ten years of employment in public service, and 120 on-time loan payments, many public service employees will see their federal loan debt disappear, thanks to this program, which was approved by Congress in 2007. Only direct loans qualify, and you must be working in public service for the entire ten years.
The Teacher Loan Forgiveness Program: “Highly qualified teachers” at “high poverty” schools many qualify for some debt forgiveness after five years. Under the regulations, teachers are “providers of direct instruction in classrooms or classroom-type teaching in non-classroom settings.” Most teachers who qualify will be relieved of $5,000 in debt. Science and math teachers and teachers of children with disabilities may qualify for up to $17,500 in forgiveness. Perkins Loans can be cancelled under similar terms.
For details, including a debt calculator that will help you to calculate your monthly payments under the income-based plan, visit the US Department of Education’s website at http://www.studentaid.ed.gov.