Managing Your Debt

Loan Forgiveness

We have great news for graduate/professional students who may incur large student loan debt to pay for their degree. Congress recently passed a loan forgiveness program for federal student loan debt for graduates who go into public service employment. This program is available to borrowers who are employed full-time in certain public service jobs for 10 years during the repayment of their loans. To qualify for loan forgiveness, borrowers must make 120 monthly payments according to one of the repayment plans listed below. After having made 120 qualifying payments, a borrower's remaining loan balance will be forgiven.

Examples of public service jobs are public interest law, including prosecution for public defense or legal advocacy in low-income communities at a nonprofit organization. Also, qualifying employment includes any non-profit organization that that qualifies for 501(c)(3) status by the Internal Revenue Code and is exempt from taxation.

Loan Repayment Plans

The following loan repayment plans are eligible for loan forgiveness. The newest program, which takes affect in July, 2009, is the Income Based Repayment plan (IBR). Under this plan, you can schedule all of your federal loan monthly payments over a 25 year period; however, if you remain in public service for the 10 year period, all remaining loan debt will be forgiven after you make 120 monthly payments.

Options	Payment Structure	Maximum Payment Period	Additional Features
Standard	Fixed	10 years	-Highest initial payment -Lowest total interest
Graduated	Tiered	10 years	-Interest only payments initially -Payments increase incrementally
Extended	Fixed or tiered	25 years	-Lowest initial payment without considering income -Federal loan debt must be greater than $30,000
Income Sensitive	Adjusted annually based on total gross income	15 years	-Payments must at least cover monthly accruing interest -You determine the percentage of your monthly payment: between 4% and 25% of your monthly gross income
Income Based IBR	Adjust annually based on: -Household AGI -Household size -Poverty guideline -State residence	25 years	-Payment is 15% of disposable income (portion of AGI that is 150% of HHS poverty guideline) -Monthly payment can be less than accrued interest -Any outstanding eligible loan balance is cancelled after 25 years of being “economically challenged”