We all know at this point that student loan debt is now the second-largest consumer debt category just one step behind mortgage debt and higher than credit cards and auto loans. Now the good thing about federal student loans is that it offers benefits that many other loans don’t.
One of the benefits is the opportunity to qualify for loan forgiveness and obviously, under a few special circumstances, The Department of Education may forgive part or all of your federal student loans.
Under these benefits, you are no longer required to make your loan payments. Now knowing and understanding all the student loan forgiveness options you have is vital because if you are struggling to pay off your debt, student loan forgiveness could help you.
These are the most common student loan forgiveness programs available simply explained:
1.Standard Repayment Plan
Eligible Loans
- Direct Subsidized and Unsubsidized Loans
- Subsidized and Unsubsidized Federal Stafford Loans
- All PLUS Loans
- All Consolidation Loans (Direct or FFEL)
Monthly Payment & Time Frame
- Payments are a fixed amount
- Up to 10 years (up to 30 years for Consolidation Loans)
Eligibility & Other Information
- All borrowers are eligible for this plan
- You’ll pay less over time than other plans
- No forgiveness options with this plan
2.Graduated Repayment Plan
Eligible Loans
- Direct Subsidized and Unsubsidized Loans
- Subsidized and Unsubsidized Federal Stafford Loans
- All PLUS Loans
- All Consolidation Loans (Direct or FFEL)
Monthly Payment & Time Frame
- Payments start off lower and then increase by about 20% every two years
- Up to 10 years (up to 30 years for Consolidation Loans)
Eligibility & Other Information
- All borrowers are eligible for this plan
- You’ll pay more over time than under a 10-year Standard Plan
- There are no forgiveness options with this plan
3.Extended Repayment Plan
Eligible Loans
- Direct Subsidized and Unsubsidized Loans
- Subsidized and Unsubsidized Federal Stafford Loans
- All PLUS Loans
- All Consolidation Loans (Direct or FFEL)
Monthly Payment & Time Frame
- Payments may be fixed or graduated
- Up to 25 years
Eligibility & Other Information
- If you’re a Direct Loan borrower, you must have more than $30,000 in outstanding Direct Loans
- If you’re an FFEL borrower, you must have more than $30,000 in outstanding FFEL Program Loans
- Your monthly payments will be lower than under the 10-year Standard Plan or the Graduated Repayment Plan
- You’ll pay more over time than under the 10-year Standard Plan
- There are no forgiveness options with this plan
4.Revised Pay As You Earn Repayment Plan (REPAYE)
Eligible Loans
- Direct Subsidized and Unsubsidized Loans
- Direct PLUS loans made to students
- Direct Consolidation Loans that do not include PLUS loans (Direct or FFEL) made to parents
Monthly Payment & Time Frame
- Your monthly payments will be 10% or discretionary income
- Payments are recalculated each year and are based on your updated income and family size
- f you’re married, both you and your spouse’s income or loan debt will be considered, whether taxes are filed jointly or separately (with limited expenses)
- Any outstanding balance on your loan will be forgiven if you haven’t repaid your loan in full after 20 or 25 years
Eligibility & Other Information
- Any Direct Loan borrower with an eligible loan type may choose this plan
- Your monthly payment can be more than the 10-year Standard Plan amount
- You may have to pay income tax on any amount that is forgiven
- Good option for those seeking Public Service Loan Forgiveness (PSLF)
5.Pay As You Earn Repayment Plan (PAYE)
Eligible Loans
- Direct Subsidized and Unsubsidized Loans
- Direct PLUS loans made to students
- Direct Consolidation Loans that do not include PLUS loans (Direct or FFEL) made to parents
Monthly Payment & Time Frame
- Your maximum monthly payments will be 10% of discretionary income
- Payments are recalculated each year and are based on your updated income and family size
- If you’re married, your spouse’s income or loan debt will be considered only if you file a joint tax return
- Any outstanding balance on your loan will be forgiven if you haven’t repaid your loan in full after 20 years
Eligibility & Other Information
- You must be a new borrower on or after Oct. 1, 2007 and must have received a disbursement of a Direct Loan on or after Oct. 1, 2011
- You must have a high debt relative to your income
- Your monthly payment will never be more than the 10-year Standard Plan amount
- You may have to pay income tax on any amount that is forgiven
- Good option for those seeking Public Service Loan Forgiveness (PSLF)
6.Income Based Repayment Plan (IBR)
Eligible Loans
- Direct Subsidized and Unsubsidized Loans
- Subsidized and Unsubsidized Federal Stafford Loans
- All PLUS loans made to students
- Consolidation Loans (Direct or FFEL) that do not include Direct or include Direct or FFEL PLUS loans made to parents
Monthly Payment & Time Frame
- Your monthly payments will be 10 or 15% of discretionary income.
- Payments are recalculated each year and are based on your updated income and family size
- If you’re married, your spouse’s income or loan debt will be considered only if you file a joint tax return
- Any outstanding balance on your loan will be forgiven if you haven’t repaid your loan in full after 20 or 25 years
- You may have to pay income tax on any amount that is forgiven
Eligibility & Other Information
- You must have a high debt relative to your income
- Your monthly payment will never be more than the 10-year Standard Plan amount
- You’ll pay more over time than under the 10-year Standard Plan
- Good option for those seeking Public Service Loan Forgiveness (PSLF)
7.Income-Contingent Repayment Plan (ICR)
Eligible Loans
- Direct Subsidized and Unsubsidized Loans
- Direct PLUS Loans made to students
- Direct Consolidation Loans
Monthly Payment & Time Frame
- Your monthly payment will be the lesser of 20% of discretionary income the amount you would pay on a repayment plan with a fixed payment over 12 years, adjusted according to your income
- Payments are recalculated each year and are based on your updated income, family size and the total amount of your Direct Loans
- If you’re married, your spouse’s income or loan debt will be considered only if you file a joint tax return or you choose to repay your Direct Loans jointly with your spouse
- Any outstanding balance will be forgiven if you haven’t repaid your loan in full after 25 years
Eligibility & Other Information
- Any Direct Loan borrower with an eligible loan type may choose this plan
- Your monthly payment can be more than the 10 year Standard Plan amount
- You may have to pay income tax on the amount that is forgiven
- Good option for those seeking Public Service Loan Forgiveness (PSLF)
- Parent borrowers can access this plan by consolidating their Parent PLUS Loans into a Direct Consolidation Loan
8.Public Service Loan Forgiveness
To learn more about Public Service Loan Forgiveness check here
Conclusion
Finally, remember every case is different and if you are still unsure of what options you have, trusted and professional assistance with a free consultation to help you better understand your options can help you make a decision.
