In order to qualify for Public Service Loan Forgiveness (PSLF), borrowers must not choose an extended repayment plan as many have done in the past.
Qualifying monthly payments include only those made on time as part of:
- Income Contingent Repayment (ICR) plan;
- Income-Based Repayment (IBR) plan;
- Standard Repayment plan based on a 10-year repayment schedule; or
- A repayment plan where the monthly amount paid was not less than the monthly amount required under Standard Repayment over a 10-year repayment period.
IBR becomes available on July 1, 2009.
Because IBR is not available until July 1, 2009, consider choosing Income-Contingent Repayment (ICR) now, and switching to IBR in July 2009.
Qualifying payments do not need to be consecutive. An individual could take time off from their eligible employment (for example, to stay home with children), during which time payments made would not count toward the 120 required payments. However, payments will begin to count again when the individual is back in eligible employment.
IBR will be the preferred repayment plan for most borrowers who will ultimately earn PSLF. IBR will minimize monthly loan payments and maximize the amount ultimately forgiven, if forgiveness is earned.
Beware of Non-Qualifying Payments
These payments do NOT count toward the 120-month requirement:
- Payments made under a fixed term repayment plan with a term of more than 10-years;
- Payments made while not working in full-time qualifying public service employment;
- Payments made on non-qualifying loans (e.g., FFEL loans, commercial loans, Parent PLUS loans);
- Payments not made within 15 days of due date; and
- Payments made while borrower is in default.