Public Service Loan Forgiveness November 2011
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The document provides information about two federal student loan repayment programs: Public Service Loan Forgiveness and Income-Based Repayment. It summarizes the key eligibility requirements and benefits of each program, including that Public Service Loan Forgiveness forgives the remaining loan balance after 120 qualifying monthly payments over 10 years for borrowers working in public service jobs, while Income-Based Repayment forgives any remaining balance after 25 years of repayment for all eligible borrowers. It also discusses factors that determine repayment amounts under Income-Based Repayment and lists resources for more information.
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Public Service Loan Forgiveness November 2011
- 1. Public Service Loan Forgiveness & Income Based Repayment Alisa M. Rosales, J.D. Associate Director, Law Career Services DePaul University College of Law November 2011
- 2. Today’s Agenda • Public Service Loan Forgiveness • Income-Based Repayment • Which Loans are Which and Why It Matters • Eligible Loans • Qualifying payments • LRAPs & specific repayment plans • Tax issues
- 3. What You Can Expect to Take Away • You’ll know: – how to determine how much you stand to benefit – the requirements of the programs – what steps you need to take to qualify • You’ll also know: – what’s still being worked out and – where to go for more information.
- 4. College Cost Reduction and Access Act Public Service Loan Forgiveness Income Based Repayment
- 5. Two kinds of loan forgiveness • IBR will forgive remaining debt, if any, after 25 years of qualifying payments. • If you work in public service, you could earn forgiveness after 10 years of qualifying payments.
- 6. Public Service Loan Forgiveness
- 7. Qualifying Employment Eligible Loans Qualifying Payments Public Service Loan Forgiveness
- 8. Public Service Loan Forgiveness • The balance of principal and interest on eligible Federal Direct Loans is canceled by the federal government after: – 120 qualifying loan payments while working full-time in a qualifying public service position after October 1, 2007.
- 10. 501(c)(3) Government Non-profit AmeriCorps Peace Corps Position ―Public Service Organization‖
- 11. What Counts as a Government Job? • Government employment includes work for: – local, State, Federal, and Tribal governments – government organizations, agencies, and entities – but not service as a member of the U.S. Congress
- 12. Qualifying Employment Full-time, paid work
- 13. Definition of “Full-Time” • Working in qualifying employment in one or more jobs for the greater of— – An annual average of at least 30 hours per week, or – For a contractual or employment period of at least 8 months, an average of 30 hours per week; or – Unless the qualifying employment is with two or more employers, the number of hours the employer considers full-time.
- 14. Career Public Defender $100,000 Eligible Debt Initial PI AGI: IBR Monthly 30 Year Fixed 10 Year Fixed $40K Payment Monthly (Affordable?) Year 1: $40,000 $297 $696 $1184 Year 2: $41,200 $306 $696 $1184 Year 3: $42,436 $315 $696 $1184 Year 4: $43,709 $324 $696 $1184 Year 5: $45,020 $334 $696 $1184 Year 6: $46,371 $344 $696 $1184 Year 7: $47,762 $355 $696 $1184 Year 8: $49,195 $365 $696 $1184 Year 9: $50,671 $376 $696 $1184 Year 10: $52,190 $387 $696 $1184 Years 11-30: ... $0 $696 $0 Total Paid IBR: $40,849 Total Forgiven: $133,696 10 Year Fixed: $142,158 30 Year Fixed: $250, 598
- 15. Monthly Payments $1,400 $1,200 $1,000 10-Year $800 30-Year $600 IBR $400 $376 $387 $344 $355 $365 $315 $324 $334 $297 $306 $200 $0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
- 16. What is Income-Based Repayment? Not your mother’s repayment plan
- 17. Simplified Adjusted Gross Income Wages plus » Interest income » Alimony received and minus » Alimony paid » Student loan interest deduction » Deduction for IRA contribution
- 18. Married Filing Jointly Your Your Spouse’s AGI Income Income
- 19. Married Filing Separately Your AGI Income
- 20. Disadvantages to Filing Separately • Higher tax rate • Loss of certain credits and adjustments: – child and dependent care credit – adoption expense credit – Hope and Lifetime Learning credit; and – deduction for qualified educational loan interest
- 21. Treatment of Joint Filers • Both spouses' federal loan debts as well as their joint income will be considered when calculating IBR payments.
- 22. IBR Monthly Payment Amount Source: United States Department of Education Annual Family Size Income 1 2 3 4 5 6 7 $10,000 $0 $0 $0 $0 $0 $0 $0 $15,000 $0 $0 $0 $0 $0 $0 $0 $20,000 $47 $0 $0 $0 $0 $0 $0 $25,000 $109 $39 $0 $0 $0 $0 $0 $30,000 $172 $102 $32 $0 $0 $0 $0 $35,000 $234 $164 $94 $24 $0 $0 $0 $40,000 $297 $227 $157 $87 $16 $0 $0 $45,000 $359 $289 $219 $149 $79 $9 $0 $50,000 $422 $352 $282 $212 $141 $71 $1 $55,000 $484 $414 $344 $274 $204 $134 $64 $60,000 $547 $477 $407 $337 $266 $196 $126 $65,000 $609 $539 $469 $399 $329 $259 $189 $70,000 $672 $602 $532 $462 $391 $321 $251
- 23. Who can choose IBR? High debt relative to income
- 24. Who Has a Partial Financial Hardship? Debt AGI Debt AGI $10,000 $25,451 $65,000 $76,087 $15,000 $30,055 $70,000 $80,690 $20,000 $34,658 $75,000 $85,293 $25,000 $39,261 $80,000 $89,896 $30,000 $43,864 $85,000 $94,500 $90,000 $99,103 $35,000 $48,467 $95,000 $103,706 $40,000 $53,071 $100,000 $108,309 $45,000 $57,674 $112,912 $105,000 $50,000 $62,277 $110,000 $117,516 $55,000 $66,880 $115,000 $122,119 $60,000 $71,484 $120,000 $126,722 Source: Jeff Hanson, Ph.D. , Director of Borrower Education, Access Group, Inc. Assumptions: Interest rate = 6.8%; 2009 Poverty Guidelines; Household size of 1 residing in 48 contiguous states
- 25. www.ibrinfo.org
- 27. Eligible Loans Know Your Loans
- 28. Qualifying Employment Eligible Loans Qualifying Payments Public Service Loan Forgiveness
- 29. Grad PLUS Subsidized Federal Unsubsidized Stafford Loans Stafford Federal Consolidation
- 30. Commercial and Alternative Student Loans Are Never Eligible
- 31. FFEL Federal Student Loans Federal Direct
- 32. Find Out What Kind of Student Loans You Have • National Student Loan Data System: http://www.nslds.ed.gov/
- 33. www.nslds.ed.gov
- 34. Eligible Loans for Public Service Loan Forgiveness ONLY FEDERAL DIRECT
- 35. Eligible Loans for Income-Based Repayment FFEL and Federal Direct Loans
- 36. FFEL Loans Must Be Consolidated Into Federal Direct http://loanconsolidation.ed.gov/
- 38. Which loans are not eligible? • Loans that are currently in default • Parent PLUS Loans • Consolidation loans that repaid a parent PLUS Loan • Alternative or commercial student loans
- 40. Qualifying Employment Eligible Loans Qualifying Payments Public Service Loan Forgiveness
- 42. Repayment Plan Selection Form
- 43. Non-Qualifying Payments Any term of years longer than 10-years
- 44. What payments don’t count toward the 120 payments required for Public Service Loan Forgiveness? • Payments made on the ―wrong‖ repayment plan • Payments made while in the ―wrong‖ kind of job • Payments made on the ―wrong‖ kind of loans • Late payments (more than 15 days)
- 45. Law School State-Based LRAPs LRAPs HEOA: Employer Prosecutors, LRAPs Defenders and Legal Aid CCRAA: Public Service Loan Forgiveness
- 46. What About Taxes on Loan Forgiveness? TAXABLE NOT TAXABLE • 25 Year IBR Forgiveness • Public Service Loan • Employer LRAPs Forgiveness • John R. Justice • Most law school LRAPs
- 47. Webinars, links, and more! askheatherjarvis.com
- 48. University Resources • Don’t forget Financial Fitness has tools too! http://financialfitness.depaul.edu
- 49. Special Thanks to Heather Jarvis, advocate, mentor, and friend for her tireless and thorough work on behalf of all those working and dedicating their lives improving their lives through continued education!