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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Many federal student loan borrowers can take advantage of Department of Education programs that limit monthly payments. In fact, there are four repayment programs that limit monthly payments based on discretionary income. These options also allow borrowers to receive loan forgiveness after completing the specified number of timely payments required by their chosen Repayment Plan. For instance, Income-Based Repayment (IBR) provides loan forgiveness after making 20 to 25 years of qualifying payments. However, many borrowers do not realize that at the conclusion of the Plan when the balance remaining is forgiven, as the law stands now you will receive a notice (or 1099 Statement) indicating you will have to claim the forgiven amount as income. You could find this to be a very unwelcome surprise after thinking you had made your final payment. It is difficult to determine how much you would have to pay after completing your student loan…
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We have blogged extensively about income-driven repayment plans (IDR) plans for eligible federal student loan borrowers. The Department of Education offers four income-driven repayment plans to eligible borrowers; Income-Based Repayment (IBR), Income-Contingent Repayment (ICR), Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE). Each plan has different requirements and repayment structures. However, there is a universal rule for all four plans – you must recertify your income each year. Some people forget to recertify, and the consequences are horrific. Income-driven plans limit your monthly payments to a percentage of your discretionary income. For instance, let’s say that you earn $37,000 a year, are enrolled in the IBR plan, and pay $117 each month on a $75,000 student loan balance. If you failed to recertify by the due date, then your payments could revert to what they were under the standard 10-year repayment plan. This means you could…
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