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If a student has a student loan of $100K. All he has to do is to make 120 payments (10 years) and be a employee at a not-for profit organization during those 10 years, the remaining balance will be forgiven/erased.
Can the student refinance the loan and increase the repayment term to 30 years? That way, he would only have to pay 10 years of payments, and the remaining 20 years would be forgiven.
That link is one of the better references out there (as it should be, since it's Dept. of Education hosted). There are a few other good resources as well.
To qualify as an eligible payment (of the 120 required) the payment must either be under the 10 year standard, or the Income Based/Pay As You Earn programs.
IBR is a 25 year term, whereas PAYE is 20 year, but the payments each month vary based on earnings, not on balance owed. If you have 100k in eligible debt, but earn 100,000 per year, you'll still have made $90,000 in payments over the ten years. But you'd have significant balance still left for discharge. Make less and more gets discharged.
If you were to choose the 30 year graduated or extended payment plans, neither of those qualify for the PSLF discharge.
That said, the basic design of the system is that there's an assumption that only a very small percent of people will ultimately meet all the qualifying criteria - you need to stay in a full-time qualifying position for 10 full years, while making little enough that you aren't paying off most if not all of the loan in that span anyway.
That link is one of the better references out there (as it should be, since it's Dept. of Education hosted). There are a few other good resources as well.
To qualify as an eligible payment (of the 120 required) the payment must either be under the 10 year standard, or the Income Based/Pay As You Earn programs.
IBR is a 25 year term, whereas PAYE is 20 year, but the payments each month vary based on earnings, not on balance owed. If you have 100k in eligible debt, but earn 100,000 per year, you'll still have made $90,000 in payments over the ten years. But you'd have significant balance still left for discharge. Make less and more gets discharged.
If you were to choose the 30 year graduated or extended payment plans, neither of those qualify for the PSLF discharge.
That said, the basic design of the system is that there's an assumption that only a very small percent of people will ultimately meet all the qualifying criteria - you need to stay in a full-time qualifying position for 10 full years, while making little enough that you aren't paying off most if not all of the loan in that span anyway.
Let's say someone owes $200K in student loans (undergraduate and law school debt), he works for the federal government making $90K, at the end of his 10 years with the Federal government, he can discharge a big chunk if not most of his remaining balance?
If the answer is "yes," that seems like a very good deal.
No. In order to take advantage of the loophole and get a significant amount of your outstanding student loan balances forgiven, you are going to have to have out a LOT of student loans and make hardly NOTHING throughout the year in comparison to the student loan debt you racked up.
$200k in loans and $90k in income isn't going to work. I'm talking more along the lines of $200,000 in student loans and $30,000 a year in income. Every year you would apply for IBR and PAYE, they would reduce the minimum monthly payments down based on your qualifications for that year in particular. Every month's payment is considered one of the "120 qualifying payments". You keep doing this same procedure of re-applying for IBR and PAYE every year, getting the monthly minimum payments down as low as possible (while still making hardly NOTHING each year in comparison to the debt you racked up) and by year ten, you should get a significant amount forgiven. They might tax you for the amount forgiven though.
This loophole was mainly created to support more "government make work jobs" as a way to bail out those with worthless college degrees. Anybody with a quality college degree should be in a field making a good amount of income, thus, they wouldn't even qualify OR if they qualified, they wouldn't have hardly any amounts forgiven in 10 years.
No. In order to take advantage of the loophole and get a significant amount of your outstanding student loan balances forgiven, you are going to have to have out a LOT of student loans and make hardly NOTHING throughout the year in comparison to the student loan debt you racked up.
I think you're confusing the two programs out there. One is based on income, how old your loans is, etc. And there is another one based on 10 years service at government/non-profit organization regardless of income. I am talking about the latter.
Let's say someone owes $200K in student loans (undergraduate and law school debt), he works for the federal government making $90K, at the end of his 10 years with the Federal government, he can discharge a big chunk if not most of his remaining balance?
If the answer is "yes," that seems like a very good deal.
NO no no. It doesn't work that way. There are so many restrictions on it that very few people will qualify. You have to have a lot of loans, and then make very very little money. You have to be on a particular payment plan, and often that plan will have your loan paid off in 10 years anyway, so it won't help to have forgiveness. In some cases, the payments required to be on the forgiveness program will actually be much higher per month than other plans, meaning that people can't afford to take advantage of it. It's just more BS. I'll be surprised if anyone ever gets their loan forgiven under this program.
NO no no. It doesn't work that way. There are so many restrictions on it that very few people will qualify. You have to have a lot of loans, and then make very very little money. You have to be on a particular payment plan, and often that plan will have your loan paid off in 10 years anyway, so it won't help to have forgiveness. In some cases, the payments required to be on the forgiveness program will actually be much higher per month than other plans, meaning that people can't afford to take advantage of it. It's just more BS. I'll be surprised if anyone ever gets their loan forgiven under this program.
Once again, I think you're confusing the other programs with the one that only require you to make 120 payments while working for the government or non-profit and that's it.
You can extend your loan from 10 to 30 years to reduce the monthly payment and at the 10 year mark, have the rest of the balance forgiven.
Yes, people are confusing the programs. You don't have to be on an income-based repayment plan to take advantage of the loan forgiveness for public service/non-profit employees. However, you can combine the two if you qualify for both.
The problem is that if you make a lot of money in comparison to the amount of loans you have, you will probably end up paying off most or all of your loan within those 10 years because you won't qualify for reduced payments. Bler144 gave a good explanation. There are online calculators that will help you figure what kind of payments to expect given different terms and if you might qualify for the income-based or pay as you earn plan.
This program was not created for those with worthless degrees. This program, like the teacher program, was made to encourage people to work for less pay in the public/non-profit sector. At the graduate degree level, the private sector usually pays more than the government.
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