The Trump administration recently introduced budget proposals that could spell the end for Public Service Loan Forgiveness (PSLF). In 2007, the Bush administration signed PSLF into law. PSLF allows eligible federal loan borrowers to receive tax-free loan forgiveness for working in many public sector jobs. The program allows for loan forgiveness after making 120 eligible payments. You have to meet certain requirements to be eligible for PSLF. Prior blog posts published by our law firm go into more detail on this program and its requirements. You must work within a public sector or nonprofit job that is eligible for PSLF forgiveness. Additionally, you must enroll in an eligible repayment plan. Borrowers from all walks all life are enrolled in PSLF. If you are a teacher, doctor, lawyer, government official, police officer or nonprofit worker, then you can enroll if you are eligible. Certain professions generally incur large student loan balances….
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The Department of Education offers four income-driven repayment (IDR programs) programs for federal student loan borrowers (IBR, ICR, REPAYE and PAYE). These programs limit your monthly payments to a percentage of your discretionary income. However, there is a universal rule that applies to these four programs—you must recertify your income each year to stay enrolled. Whatever you do, do not forget to recertify by the deadline! Here is a hypothetical example which demonstrates some of the consequences of forgetting to recertify your student loans. What Could Happen If You Do Not Recertify Let’s say for example that you are enrolled in the IBR program, which limits your monthly payments to $117 per month. Your monthly payments under the standard 10-year repayment option would be $480 per month. You are also enrolled in automatic payments through your loan servicer, meaning your checking account is auto-debited each month. Then, for whatever reason,…
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To default on your student loans, you need to miss around a year of payments. Here in the United States, approximately 1 million student loan borrowers hit that mark every year. However, there are signs that this trend is changing, and income-based repayment plans might be one of the reasons why. How Are Income-Based Repayment Programs Affecting Student Debt? The New York Federal Reserve is reporting that 9 percent of student loans are overdue by 30 days or more. Back in 2013, that number was 11 percent. That means fewer student loan borrowers are defaulting on their loans, and experts are pointing to several causes. Improvements in the economy is one of the reasons these experts believe these rates are going down. Plentiful jobs are resulting in more stable incomes, and while that’s keeping people from defaulting, job availability is not the only reason default rates are dropping. Income-based repayment…
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