Student Debt? These Programs Could Spell Relief
More student loan borrowers are expected to gain access to new federal programs designed to reduce monthly payments and lessen the wider economic toll of student debt.
The Revised Pay as You Earn (REPAYE) program will expand an existing income-based repayment program. It may be available to as many as 5 million Direct Loan borrowers (not Parent Direct PLUS Loan borrowers), without their having to demonstrate “financial hardship” and regardless of when they took out their Direct Loans.
With this repayment plan, your monthly student loan payment would be 10% of your annual discretionary income. Discretionary income refers to what you earn above 150% of the federal poverty line ($17,655 in 2015). A borrower earning $40,000, for example, would make payments based on discretionary income of $22,345.
After 20 years of on-time payments, the remaining balance would be forgiven. If you borrowed money for graduate school, you must wait 25 years for forgiveness. Debt may be forgiven after 10 years for those in certain public-service jobs.
To qualify for loan forgiveness under the Public Service Loan Forgiveness (PSLF) program, you must make 120 on-time payments on your Direct Loans (Direct Subsidized and Unsubsidized Loans, Stafford Loans, Direct PLUS Loans, and Direct Consolidation Loans). Only payments made after October 1, 2007, will qualify.
While making the 120 payments, you must be working full-time at a qualifying public-service organization, which may include federal, state, and local government entities such as the military, public safety and law enforcement, public education and libraries, public health and legal services, as well as tax-exempt, not-for-profit groups.