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Federal
Student Loan 
Forgiveness Programs
 
Repayment Plans, How do they Work?

Repayment plans allow students to choose from multiple repayment programs that will reduce your monthly payment. Federal Student Aid offers a Repayment Estimator which allows you to calculate what your monthly repayments might look like. 

There is a Pay As You Earn Plan based on your family size and income. Like all plans, there are eligibility requirements that must be met. Often times, a repayment plan spans 10+ years. However, in this instance, it’s based on your monthly income. If your income is subject to fluctuation, this can be good or bad. It truly depends on the individual.

Some things that will be asked of you include:
  • Income and expenses (discretionary income is taken into account)
  •  Current student loans
  • Status of your student loans (good standing, default, behind a few months, etc.)
  • You must be a new borrower as of 2007
  • Received disbursement of a direct loan by 11/1/11
  • New borrower with no outstanding balances

As with everything, financial health is key so be sure that when you make decisions about repayment, you have a macro-view of what the next 12-24-36 months might look like. Though not always easy to predict your financial future, try to anticipate as much as you can. Be sure to do your due diligence; research as much as you can about a repayment plan.

Am I Eligible for Repayment Plans for Private Student Loans?

The short answer is, yes. To expound on that, it’s important to realize that each private student loan is different. Repayment plans are available. Find out about your eligibility by calling one of our Loan Consultants.

CALL TODAY (844) 867-5623

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How do I know if I Qualify for Student Debt Relief?


Finding out if you qualify for student debt relief requires a bit of research, but it’s a worthy endeavor, as it can save you thousands of dollars in the long run. Additionally, companies like Student Doc and Prep are centered on helping individuals find out if they qualify and doing 90% of the legwork on your behalf, which ultimately saves you time and money. In summary, it’s not that painful! 

Public Service Loan Forgiveness exists because of Obama’s Loan Forgiveness Program implemented in 2007. The objective, as mentioned, was to encourage qualified graduates to pursue careers in the public sector. As a result, help people consolidate your federal loans in a qualifying program. 

Forgiveness only applies to federal student loans. Though private loans are ineligible for forgiveness, we have partner banks that focus solely on helping individuals consolidate their private student loans.

Pay As You Earn (PAYE) Plan

The Obama Pay As You Earn Repayment Plan, often known colloquially as PAYE, is a lesser known but equally beneficial repayment program that was passed by President Obama on December Obama Pay As You Earn21st, 2012. This was actually the first piece of legislator that Obama passed solely to assist those with federal student loans.


Currently, PAYE only applies to federal student loans that were disbursed on or after the October 1st, 2007 date. This is unfortunate, since it disqualifies a lot of Americans with federal student loans. You must not have had a balance on a Direct Loan or FFEL loan when you received the loan after October 1st, 2007. 

However, later this year, President Obama plans to issue an executive order that extends the application process to loan holders who first began receiving federal student loans prior to that date, meaning that more borrowers will be able to qualify for this great plan. 

Keep in mind that, similarly to the Income Based Repayment option, applicants must prove at minimum Partial Financial Hardship as defined by the Department of Education in order to qualify. The specific, detailed requirements are listed below:

  • The only eligible federal loans are Direct Subsidized and Unsubsidized for Undergraduates and Direct Plus for Graduates and Professionals. Direct Plus Loans issued to parents are excluded.
  • Applicants must prove Partial Financial Hardship. This includes not just their own income but any family members’ incomes, too.
  • You must be a new borrower as of October 1st, 2007, and must have received a disbursement of a Direct Loan on or after October 1st, 2011. You are defined as a new borrower if you had no outstanding balance on a Direct Loan or FFEL Program loan when you received a Direct Loan or FFEL Program loan on or after that date in 2007.

Approved applicants will soon see their payments capped at 10% of their income that exceeds 150 percent of the federal poverty line. The specifics are detailed in the chart below.

Pay As You Earn (PAYE) Monthly Calculator

Monthly Adjusted Gross Income                 $4,280

(minus) 150% of Poverty Line (1)              -$1,480

Discretionary Income                                =$2,800 (multiplied by)  x.10%

Monthly PAYE Payment                              $280

(1) Determined annually and based on federal poverty guidelines.

Reduced Term and Student Loan Forgiveness

All of these factors are recalculated annually in order to ensure that every applicant still qualifies. It is a fair and just system that allows the government to keep track of any changes to applicant’s incomes.

If approved, graduates enrolled in the PAYE program are given up to 20 years to repay their debt. After 20 years of monthly payments have been made successfully, any remaining debt is forgiven. However, this remaining debt is still taxable.

PAYE is considered one of the most generous and helpful repayment programs for borrowers.

Watch for These Coming Changes to the PAYE Repayment Plan

As stated above, the President will release an extended order later this year. In addition, his proposed 2015 budget includes the following significant changes to PAYE in the coming year. If Congress approves the changes, the following will occur:

  • Obama will eliminate the standard payment cap under the Obama Pay As You Earn plan so that high-income, high-balance borrowers pay an equitable share of their earnings as their income rises.
  • There will be a cap on Public Sector Loan Forgiveness (PSLF) for undergraduate students at the aggregate loan limit to protect against institutional practices that may increase student indebtedness.
  • The loan period will be extended to 25 years for borrowers with balances above the aggregate loan limit.
  • Obama’s order will prevent payments made under non-income driven repayment plans from being applied toward PSLF. This helps to ensure that those students with the greatest need are considered first and have their loans forgiven before anyone else who is in less immediate need.
  • There will be a cap on the amount of interest that is permitted to continue growing when a borrower’s monthly payment is not enough to prevent expanding loan balances.
  • Payments for married borrowers who file separately on the combined household Adjusted Gross Income will be calculated.

The Obama Pay As You Earn plan is considered to be highly generous, but even still, not every single person who applies will qualify, even with the approved changes in President Obama’s executive order. It does currently restrict benefits against those students with high loan balances and those who choose to pursue a public service career.

Do your research before you apply. If you do not think that it is the best option for you or that you will qualify, you can find details on the other Income Based Repayment Plans by reviewing the information on our website or by contacting us directly.

Income Based Repayment Plan

The Department of Education offers many different loan repayment options to help make payments more manageable. If you are a low-income earner, one of the most popular repayment programs to apply for is Income Based Repayment.

Benefits of the Income Based Repayment PlanMost importantly, your payment is based on your income. 

What you owe is not taken into account. The new monthly payment amount will not be higher than 10% of your discretionary income, if were a new borrower on or after July 1st, 2014. On the other hand, if you had loans prior to this date, then 15% of your discretionary income is used to calculate your payment.Either way, this is the amount of income you earn over 150% of the federal poverty line for your family size. 

This payment will not be higher than what you were paying under the standard ten-year repayment plan. In many cases, borrowers in the Income Based Repayment Program actually pay a grand total of zero dollars if their discretionary income isn’t high enough to meet the minimum amount.

This is a good option for those who are looking for work after graduation and cannot meet their monthly payments in the meantime while also paying for their basic necessities.

Qualifying Loan Types

Eligibility for Income Based Repayment depends on which loans you chose to take out for your education and the date they were taken out. 

The following Federal Student Loans from the Direct Loan and Federal Family Education Loan (FFEL) Programs qualify for application:

  • Direct PLUS Loans (Graduate and Professional Students)
  • Direct Consolidation Loans without PLUS Loans that were made directly to parents and not just as cosigners.
  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • FFEL PLUS Loans (Graduate and Professional Students)
  • FFEL Consolidation Loans without PLUS Loans that were made directly to parents and not just as cosigners.

If your loan type is not listed above, don’t worry. You may still be eligible for the IBR by consolidating your federal student loans into the Direct Loan program.

Forgiveness of Interest

If your new monthly payment isn’t large enough to pay the accruing interest on subsidized portion of your direct loan, there are options for you! 

The federal government will pay it for a period of up to three years in a row—but no more than that–once you begin your Income Based Repayment program.

End of Term Forgiveness
This is one of the greatest and most relieving benefits. For new borrowers that took their loans out after July 1st, 2014, they can have their loans completely forgiven after 20 years. 

For borrowers that took them out before that date, they need to wait an additional five years, but the basic idea is the same—total forgiveness after 20-25 years.

The lifetime of an Income Based Repayment Loan is considered to be no more than 25 years, so if over the lifetime of this loan, you make 300 qualified payments and the loan is still not completely paid off, any remaining amount will be legally discharged and wiped clean from your record.

Keep in mind that this forgiven and discharged amount is considered taxable and must be paid for the year it was forgiven.

Public Sector 120 Month Forgiveness Plan

If you are a public service employee and you make 120 on time, full monthly payments under an Income Based Repayment program while employed full time with a public service organization, you could have the remaining balance of your loan or loans forgiven and discharged. Ideally, you could save up to 15 years of payments with this plan.

Annual Recalculation of Payment

Keep in mind that although there is no minimum payment with an Income Based Repayment Loan, the amount is still recalculated each year. In addition to the criteria listed in the first benefit, your family size, and any changes to income, including your spouse’s income, will change the amount that you are required to pay.

If your income increases or decreases, you will have to pay either more or less. However, even if your income rises dramatically from one year to the next, you can change your repayment plan into a standard repayment at any time you choose. 

Please feel free to get in touch with us if this happens to you and you are interested in changing repayment plans due to an income increase.

Get Started Right Away

While the Income Based Repayment Program does not accept many qualified applicants, if you do qualify, it is extensively beneficial to those who are struggling financially and do not wish to have a black mark on their credit report for many years to come. 

This program is designed specifically to help individuals and families in financial need while ensuring that the Federal Student Loan Program stays healthy and available for future students.If you believe this could be a viable option for you and your family.

Call Us Today To Find Out If You Qualify For Loan Forgiveness!!!
 

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(844) 867-5623

Student Doc And Prep is not affiliated with the United States Department of Education or any U.S. government offices or branches. Student Doc And Prep has no influence in any decisions made by the Department of Education. Student Doc And Prep is strictly a document preparation service.

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