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Frequently Asked Questions about Income-Based Repayment and Public Service Loan Forgiveness

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The following are answers to some of the most common questions borrowers have asked about income-based repayment (IBR) and public service loan forgiveness. These include questions about eligibility for and the benefits of these two related programs.

Questions about Income-Based Repayment

  1. How do I get income-based repayment?

    Call the servicer or current holder of your loans and ask to switch into income-based repayment. You may have to complete an "Alternative Documentation of Income" form the first year after you switch into income-based repayment. You may also have to provide a copy of last year's income tax return or file IRS Form 4056-T (Request for Transcript of Tax Return) to document your adjusted gross income during the previous year.

    Borrowers in the Direct Loan program will be able to specify income-based repayment in the pull-down menu on the US Department of Education's online loan repayment web site. Until then they will need to submit the Repayment Plan Selection form.
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  2. Why isn't income-based repayment available for private student loans?

    Income-based repayment is a federal repayment plan for federal student loans. The terms of private student loans are set by the banks and financial institutions that offer them, not the federal government. No private student loan program offers income-based repayment.

  3. Why isn't income-based repayment available for federal PLUS loans?

    Income-based repayment is available for Grad PLUS loans but not Parent PLUS loans. Congress specifically excluded Parent PLUS loans.

  4. I've been repaying my student loans for 25 years. Can I switch into the income-based repayment plan and get my loans forgiven now?

    The forgiveness occurs after 25 years in income-based repayment, income-contingent repayment and/or the economic hardship deferment, not other repayment plans. (Loan payments made under a standard ten-year repayment plan also count, but obviously a borrower who is using the standard repayment plan will have paid off the debt in full in only ten years. This provision is mainly beneficial to borrowers who were previously using income-based repayment but no longer demonstrate a partial financial hardship.)

  5. I'm married. Does income-based repayment base the monthly payment on just my income or is my spouse's income included?

    Income-based repayment calculates the monthly payment based on your income as reported on your federal income tax returns. If you file as married filing jointly, both incomes will be counted. If you file as married filing separately, only your income will be counted.

  6. What's the difference between income-based repayment (IBR) and income-contingent repayment (ICR)?

    Both IBR and ICR base the monthly payment on a percentage of discretionary income, but IBR uses a smaller percentage and a smaller definition of discretionary income. For most borrowers IBR will yield a smaller monthly payment than ICR. IBR also offers superior benefits, such as government payment of accrued but unpaid interest on subsidized Stafford loans for the first three years.

  7. Does income-based repayment provide the lowest monthly payment?

    For most borrowers either income-based repayment or extended repayment will provide the lowest monthly payment. Generally, borrowers who have low income compared with their debt will have a lower monthly payment under income-based repayment, while borrowers who have low debt compared with their income will have a lower monthly payment under extended repayment.

  8. Is the loan forgiveness taxable?

    The 10-year public service loan forgiveness is not taxable under section 108(f) of the Internal Revenue Code because the forgiveness is restricted to borrowers who work in specific occupations. However, the 25-year forgiveness for borrowers who don't work in public service careers will represent taxable income to the borrower under current law. See Taxability of Student Loan Forgiveness for additional details.

Questions about Public Service Loan Forgiveness

  1. Do I have to work in a public service job to use income-based repayment?

    Income-based repayment is available even if you aren't working in a public service job. If you don't work in a public service job, the remaining balance is forgiven after 25 years in repayment (excluding certain deferment and forbearance periods). If you work in a public service job, the forgiveness occurs after 10 years instead of 25.

  2. How do I apply for public service loan forgiveness?

    Forms for canceling the remaining debt are not yet available, since the soonest any borrower would obtain public service loan forgiveness is 2017. It would be a good idea for borrowers to preserve documentation of their full-time employment in a public service job each year, in case it is necessary. For example, keep a copy of your W-2 statements and/or the last pay stub of each year in a file folder. Borrowers may also have their employer complete an employment certification form (instructions). Borrowers should consider submitting the form at least annually and whenever they change employers to ensure that the qualifying service is properly recorded.

    To qualify for public service loan forgiveness you will need to move your federal student loans into the Direct Loan program. If the loans are not already in the Direct Loan program, you can move them there by consolidating them at loanconsolidation.ed.gov. (You can do this even if you've already consolidated them in the FFEL program.) Choose the income-based repayment plan to maximize the amount of forgiveness. You must make 120 payments (10 years worth of payments) while employed full-time in a public service job; the employment does not need to be continuous. The forgiveness is not retroactive, so prior employment in a public service job does not count. Public service loan forgiveness is all or nothing; you will not get any forgiveness if you work less than 10 years in a public service job. Before you commit to public service loan forgiveness, use an income-based repayment calculator to check whether there will be a financial benefit from public service loan forgiveness. Generally, borrowers whose federal student loan debt exceeds their income will benefit, but even some borrowers whose debt is less than their income might benefit.

  3. My state previously offered teacher loan forgiveness, but since then has reneged on this commitment. How certain is it that public service loan forgiveness will still exist ten years from now?

    Public service loan forgiveness is authorized by federal law (the College Cost Reduction and Access Act of 2007). While nothing prevents Congress from repealing this provision, it is highly unlikely that they would do so without either grandfathering in current students or replacing it with a similar benefit.

  4. I've worked in a public service career for the past ten years. Can I get my federal student loans forgiven now?

    The ten-year clock for public service loan forgiveness starts on October 1, 2007 or the date you start repaying your loans in the Direct Loan program while working full-time in a public service job, whichever comes later. Thus this benefit is on a going-forward basis only, and does not give retroactive credit for past employment in public service.

  5. What is a public service job? Does this mean working for the government?

    Public service jobs include teachers, first responders (policy, fire, EMT), public librarians, social workers, public defenders and prosecutors, and people who work for tax-exempt charitable organizations. It also includes people who work for the government and the military. (Members of Congress are not eligible.) If your job doesn't qualify for public service loan forgiveness, you can still have the remaining debt forgiven after 25 years in the income-based repayment plan.

  6. Does working for a foreign NGO count for public service loan forgiveness?

    No. The catchall clause in the statute is for employment in a tax exempt 501(c)(3) organization. Foreign NGOs are not 501(c)(3). The main opportunity for working in a foreign country would be through a full-time Peace Corps position, per the regulations at 34 CFR 685.219(c)(ii).

  7. Does my career qualify for public service loan forgiveness?

    Call 1-800-4-FED-AID (1-800-433-3243) to ask about a specific field of study.

  8. Do the payments need to be consecutive?

    No, the payments while working full-time in a public service job do not need to be consecutive. For example, if you were laid off from a full-time public service job and got another public service job a few months later, the intervening months would not disqualify you, although they would not count toward the 120-payment requirement.

 

 
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