Student Loan Forgiveness | Income Based Repayment Plan | College Debt
Drowing in Student Loan Debt? If so, you are not alone. While student loan debt is normally not a dischargeable debt during the bankruptcy process there are programs available to help you regain control of your student loan debt.
The US Federal government offers those who qualify an option to reduce their monthly student loan payments, based upon their income. This powerful option, available to those who qualify, is known as The Income-Based Repayment Plan (IBR).
Income-Based Repayment Plan Basics
The income-based repayment plan is designed to reduce your monthly payments and make your student loan debt more manageable. There is a unique benefit to IBR beyond the reduced monthly payments – that has some jumping for joy. What is it, you ask? The government will forgive any remaining loan balances after you repay your federal student loan through an income based repayment plan for a period not to exceed twenty-five years. Find out if you are eligible for the IBR plan.
To qualify, you must satisfy at least one of the following conditions each year:
2. Made reduced monthly payments after you no longer had a partial financial hardship or stopped making IBR payments;
3. Made monthly payments under any repayment plan that were not less than the amount required under a standard federal student loan repayment plan;
4. Made monthly payments under the standard ten-year repayment plan for the amount of your loans that was outstanding at the time you first selected IBR;
5. Made IBR payments if in Direct Loan Program; or
6. Received an economic hardship deferment.
Achieving student loan forgiveness is based upon a variety of factors You may have made monthly payments for part of the time, deferred for economic reasons during a different period, and been in an income based repayment plan for your federal student loans at other times.
Bottom line is – as you participated in an IBR program for the time period, you’re eligible to look into forgiveness. Even if the 25 years isn’t consecutive – you may still qualify for forgiveness.
Advantages of IBR
◦ Pay based on what you earn—Under IBR, your monthly payment will never be more than the amount you would be required to pay under the 10-year Standard Repayment Plan, and may be less than under other repayment plans.
◦ Interest payment benefit—If your monthly IBR payment amount doesn’t cover the interest that accrues (accumulates) on your loans each month, the government will pay your unpaid accrued interest on your Direct Subsidized Loans or Subsidized Federal Stafford Loans for up to three consecutive years from the date you began repaying your loan under IBR.
◦ Limitation on the capitalization of interest—While you have a partial financial hardship, interest that accrues but is not covered by your loan payments will not be capitalized, even if interest accrues during a deferment or forbearance.
◦ 25-year forgiveness—If you repay under IBR and meet certain other requirements, any remaining balance will be forgiven after 25 years of qualifying repayment.
◦ 10-year public service loan forgiveness —If, while you are employed full-time for a public service organization, you make 120 on-time, full monthly payments under IBR (or certain other repayment plans) you may be eligible to receive forgiveness of the remaining balance of your Direct Loans through the Public Service Loan Forgiveness Program.
Disadvantages of IBR
◦ You may pay more interest—A reduced monthly payment in IBR generally means you’ll be repaying your loan for a longer period of time, so you may pay more total interest over the life of the loan than you would under other repayment plans.
◦ You must submit annual documentation—To set your payment amount each year, your loan servicer, the organization that handles billing and other services for your loan, needs updated information about your income and family size. You must provide the documentation or your monthly payment amount will be changed to the amount you would be required to pay under the 10-year Standard Repayment Plan, based on the amount you owed when you began repaying under IBR, and will no longer be based on your income. This amount will be higher than your prior IBR payment that was based on your income. If you do not provide the required income documentation, unpaid interest will also capitalize.
◦ Taxes -You may have to pay taxes on any loan amount that is forgiven after 25 years.
Foster Law Offices, LLC is a debt relief agency, we help people file for relief under the United States Bankruptcy Code. The information above has been prepared by Foster Law Offices, LLC using information provided on the Student Federal Aid website and is intended for informational purposes only. The Income Based Repayment plan is a federal program, under the direction of the US Department of Education and the offerings, qualifications and complete program information can be found on the Federal Student Aid website. The information above cannot be construed as the program rules and the referenced material above is not intended to create, and reciept of it does not constitue, a layer-client relationship, and readers should not act upon such without seeking professional counsel.