Federal Student Loan Secrets

I was never told and there is no info about Loan Forgiveness dates for Low Income on my Federal Loan Repayment Website, so for 10 years i have been struggling to repay thousands of dollars that i dont have based on an uneducated choice i made to attend colleges i did not know i would not be able to pay off within the ‘average 10 years’. I never found that ‘promised magic job’ that my father had. I might have been able to pay rent or afford health insurance if i had known about Loan Forgiveness deadlines.

I just heard on NPR that the Department of Education’s Community Service Loan Repayment plan has been in the works since 2009, but there is still no info about it on my Federal Loan Website. I will seek out more information about these ‘secrets’ and post them below. Here are the important issues that every college graduate with a Low Income should know about, but we have not been educated about:

1. Community Service Loan Repayment Plan

(after 10 years or 20 payments?)

2. Low Income Loan Forgiveness Deadline

(after 20-25 years?)

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According to the official White House Government website:

Under this new law, students enrolling in 2014 or later are offered this option –

Forgive Any Remaining Debt after 20 Years, or after 10 Years for Those in Public Service: Borrowers who take responsibility for their loans and make their monthly payments will see their remaining balance forgiven after 20 years of payments, reduced from 25 years in current law.  Public service workers – such as teachers, nurses, and those in military service – will see any remaining debt forgiven after 10 years.

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Federal Student Aid Information Center
1-800-4-FED-AID (1-800-433-3243)
This is a toll-free number.

Direct Student Loans – 1800-848-0979

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After calling both numbers above, they told me all their information is available online, easy, and straightforward not requiring a business or law degree to understand. Ha!  The Education Department was un-apologetic and said “Most people pay the loan off in 10 years.”  Thanks for that.

The White House and the Education Department call it “Community Service” but you cannot find it on the Direct Loan website by searching for that; they call it “Public Service” Loan Forgiveness Plan.

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From the Federal Direct Loan Servicing Page:

Can my loan ever be discharged?

Yes. A discharge releases you from all obligations to repay your loan. Your loans can be partially or totally discharged if:

  • You become totally and permanently disabled. This cannot be for a condition that existed at the time you applied for the Direct Loan unless a doctor certifies that your condition substantially deteriorated after the loans were made.
  • You are unable to complete a course of study because your school closed or because your school falsely certified your eligibility.
  • Your school signed your name on the loan application or promissory note without your approval.
  • You were a victim of identity theft.
  • Your obligation to repay your loan was discharged in bankruptcy court proceedings. This may occur when conditions of extreme financial hardship are present and a judge orders the discharge of the loan(s) in an adversary proceeding.
  • You die.
  • The student for whom a PLUS Loan was obtained dies.
  • You taught in a selected low-income school for 5 consecutive years. You must also have received new loans after October 1, 1998 and have no outstanding balance on a Direct Loan or FFEL Program loan disbursed before this date. For more information on eligibility requirements for Teacher Loan Forgiveness, please click here.
  • You are and/or were employed in public service field(s) considered eligible under the Public Service Loan Forgiveness Program, during which time you made 120 separate qualifying monthly payments through an eligible repayment plan after October 1, 2007. You must also be employed in a qualifying public service job at the time of your application for forgiveness and when any remaining loan amount is forgiven. For more information on eligibility requirements for the Public Service Loan Forgiveness Program, please click here.
  • You are due but are unable to obtain a refund from your school on your Direct Loan.
  • You have a Consolidation loan obtained jointly with your spouse and one of you dies or becomes totally and permanently disabled.
  • You have a Consolidation loan that includes a Federal PLUS and/or Direct PLUS loan borrowed for a student that has died. The portion of the Consolidation loan attributable to the student that has died may be discharged.

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Repayment Plan

Changing repayment plans is a good way to manage your loan debt when your financial circumstances change. For example, you can usually lower your monthly payment by changing to another repayment plan with a longer term to repay the loan. There are no penalties for changing repayment plans.

The Direct Loan Program offers the following repayment plans:

  • Standard Repayment Plans
    • Non-Consolidation Loans – fixed payment for up to 10 years.
    • Consolidation Loans – fixed payment for up to 10 to 30 years based on total education indebtedness.
  • Extended Repayment Plans
    • Extended repayment terms are available to Direct Loan borrowers with no outstanding principal or interest balances as of October 7, 1998 and with more than $30,000 in Direct Loans.
      • Fixed Monthly Payment Option – fixed payment for up to 25 years based on Direct Loan balance greater than $30,000.
      • Graduated Monthly Payment Option – smaller payments at first that increase every two years, for up to 25 years based on a Direct Loan balance greater than $30,000.
  • Graduated Repayment Plans
    • Non-Consolidation Loans – smaller payments at first that increase every two years for up to 10 years.
    • Consolidation Loans – smaller payments at first that increase every two years for up to 10 to 30 years based on total education indebtedness.
  • Income Contingent Repayment (ICR) Plan
    • Payment amount is based on a borrower’s family size, annual Adjusted Gross Income (AGI) and the total amount of the borrower’s Direct Loan(s). This can vary year to year for up to 25 years. The ICR Plan is NOT available to a borrower with a Direct PLUS Consolidation Loan(s) made before July 1, 2006 and/or a Direct PLUS Loan(s) made to parent borrowers. However, a borrower is eligible to repay any Direct Consolidation Loan(s) made on/after July 1, 2006 under the ICR Plan even if it includes a PLUS Loan(s) made to parent borrowers.
  • The Income-Based Repayment (IBR) Plan
    • An alternative to the Income Contingent Repayment (ICR) Plan. The IBR Plan is designed to make repaying education loans easier for students who intend to pursue jobs with lower salaries, such as careers in public service. It does this by capping the monthly payments at 15 percent of your discretionary income (the difference between your Adjusted Gross Income and 150% of the poverty guideline for your family size and state of residence). You must have a partial financial hardship to enroll in the IBR Plan. If you are married AND file taxes separately, only your income will be considered when calculating your IBR payment amount. Like ICR, after 25 years of qualifying repayment, any remaining balance on the loan will be forgiven, but you may have to pay taxes on the amount forgiven.

The Direct Loan Program previously offered a range of grandfathered repayment plans prior to 9/10/2007. Borrowers who had already entered repayment on one or more of their loans prior to 9/10/07 and who have one of the grandfathered plans already assigned to their loans remained on those plans. In addition, subsequent loans that are disbursed for those borrowers will be placed on the same grandfathered repayment plans. Please note that if at any time borrowers elect to update their repayment plans, they will only be able to select from the new repayment plans. In addition, once they have changed their repayment plan, they will not be able to return to one of the grandfathered repayment plans.

  • Standard Repayment Plans – fixed payment for up to 10 years.
  • Extended Repayment Plans – fixed payment for up to 12 to 30 years, depending on the total amount a borrower owes.
  • Graduated Repayment Plan – smaller payments at first that increase every two years for up to 12 to 30 years, depending on the total amount a borrower owes.

Please contact the Direct Loan Servicing Center if the above plans do not meet your financial needs.

NOTE :

“Like ICR, after 25 years of qualifying repayment, any remaining balance on the loan will be forgiven, but you may have to pay taxes on the amount forgiven.”

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“The borrower must have made 120 separate monthly payments beginning after October 1, 2007 on the Direct Loan Program loans for which forgiveness is requested.” = 2017 would be the earliest a loan could be forgiven.

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(more information to come)

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