Income-Based Repayment: Earn Forgiveness
Income-Based Repayment lowers the amount you must pay monthly toward your educational debt. It is also possible for you to earn forgiveness on your eligible federal student loans.
This means if you have a partial financial hardship, you may enroll in IBR and make lower, income-based monthly payments while you are working toward PSLF. If you qualify for PSLF, the balance on your loans will be forgiven after 120 qualifying payments.
Example: Jane Justice starts out owing $100,000 in eligible federal debt at 6.8% interest and takes a full-time qualifying public service position that starts at $40,000.
Because she owes $100,000 and only makes $40,000, Jane has a partial financial hardship and is eligible for Income-Based Repayment (IBR). Jane enrolls in IBR. In her first year, Jane's monthly payments under IBR are $297 (as opposed to $1151 under standard 10-year repayment).
As Jane receives annual salary increases of 4%, her monthly payments under IBR gradually rise. Jane remains in public service and pays $44,102 over 10 years under the IBR plan. The federal government grants Jane PSLF and forgives $123,898, the principal and interest remaining.
* This example uses the 2009 Federal Poverty Guideline for a household of one.
IBR also has its own forgiveness provision
Even if you do not qualify for PSLF, if you are still repaying your loans after you have been in IBR for 25 years, the government will forgive the balance on these federal loans. Remember, there is no qualifying employment requirement for IBR.
Register for an informational webinar to learn more about forgiveness and utilizing IBR while working toward Public Service Loan Forgiveness.
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