Pslf & Ibr Oct. 09
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Transcript of Pslf & Ibr Oct. 09
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MANAGING STUDENT LOAN DEBT
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Today’s Agenda
• Income-Based Repayment Overview• Which Loans are Which and Why It Matters• Public Service Loan Forgiveness
– Qualifying employment– Qualifying payments– Special issues for married borrowers– Hypothetical examples
• Tax issues• Other LRAPS
– John R. Justice & Civil Legal Assistance– Traditional LRAPs
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What You Can Expect to Take Away
• You’ll know:– how to determine how much you stand to benefit– the requirements of the programs– what steps you need to take to qualify
• You’ll also know:– what’s still being worked out and– where to go for more information.
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If I Say It, I Post It
www.equaljusticeworks.org
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College Cost Reduction and Access Act
Public Service Loan Forgiveness Income Based
Repayment
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What is Income-Based Repayment?
Not your mother’s repayment plan
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IBR Monthly Payment Amount
Source: United States Department of Education
AnnualIncome
Family Size
1 2 3 4 5 6 7
$10,000 $0 $0 $0 $0 $0 $0 $0
$15,000 $0 $0 $0 $0 $0 $0 $0
$20,000 $47 $0 $0 $0 $0 $0 $0
$25,000 $109 $39 $0 $0 $0 $0 $0
$30,000 $172 $102 $32 $0 $0 $0 $0
$35,000 $234 $164 $94 $24 $0 $0 $0
$40,000 $297 $227 $157 $87 $16 $0 $0
$45,000 $359 $289 $219 $149 $79 $9 $0
$50,000 $422 $352 $282 $212 $141 $71 $1
$55,000 $484 $414 $344 $274 $204 $134 $64
$60,000 $547 $477 $407 $337 $266 $196 $126
$65,000 $609 $539 $469 $399 $329 $259 $189
$70,000 $672 $602 $532 $462 $391 $321 $251
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Who can choose IBR?
High debt relative to income
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Who Has a Partial Financial Hardship?
Source: Jeff Hanson, Ph.D. , Director of Borrower Education, Access Group, Inc.Assumptions: Interest rate = 6.8%; 2009 Poverty Guidelines;Household size of 1 residing in 48 contiguous states
Debt AGI
$10,000 $25,451$15,000 $30,055$20,000 $34,658$25,000 $39,261 $30,000 $43,864 $35,000 $48,467 $40,000 $53,071 $45,000 $57,674 $50,000 $62,277 $55,000 $66,880 $60,000 $71,484
Debt AGI$65,000 $76,087 $70,000 $80,690 $75,000 $85,293$80,000 $89,896$85,000 $94,500$90,000 $99,103$95,000 $103,706
$100,000 $108,309$105,000 $112,912$110,000 $117,516$115,000 $122,119$120,000 $126,722
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Adjusted Gross Income(Oversimplified)
Wages plus– Interest income– Alimony received
and minus– Alimony paid– Student loan interest deduction– Deduction for IRA contribution
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Married Filing Jointly
Your IncomeYour
Spouse’s Income
AGI
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Married Filing Separately
Your Income AGI
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Eligible Loans
Know Your Loans
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Federal Loans
Grad PLUS
Unsubsidized Stafford
Federal Consolidation
Subsidized Stafford
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Commercial and Alternative Student Loans Are Never Eligible
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FFEL and Federal Direct Loans
Students borrow:• Stafford Loans, subsidized and unsubsidized• GradPlus Loans• Federal Consolidation Loans
From either of the two major federal student loan programs:• Federal Family Education Loans (FFEL)• Federal Direct Loans
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FFEL
Federal Direct
Federal Student Loans
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Find Out What Kind of Student Loans You Have
• National Student Loan Data System:http://www.nslds.ed.gov/
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FFEL and Federal Direct
Loans
Eligible Loans for Income-Based Repayment
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ONLY FEDERAL DIRECT
Eligible Loans for Public Service Loan Forgiveness
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FFEL Loans Must Be Consolidated Into Federal Direct
http://loanconsolidation.ed.gov/
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Which loans are not eligible?
• Loans that are currently in default
• Parent PLUS Loans
• Consolidation loans that repaid a parent PLUS Loan
• Alternative or commercial student loans
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Learn How Rehabilitation or Consolidation Can Help You
Get Out of Default
• Studentloanborrowerassistance.org
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What about loan forgiveness?
• IBR will forgive remaining debt, if any, after 25 years of qualifying payments.
• If you work in public service, you could earn forgiveness after 10 years of qualifying payments.
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Public Service Loan Forgiveness
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Public Service Loan Forgiveness
Qualifying Payments
Eligible Loans
Qualifying Employment
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Public Service Loan Forgiveness
• The balance of principal and interest on eligible Federal Direct Loans is canceled by the federal government after:
– 120 qualifying loan payments while working full-time in a qualifying public service position after October 1, 2007.
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ONLY FEDERAL DIRECT
Eligible Loans for Public Service Loan Forgiveness
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FFEL Loans Must Be Consolidated Into Federal Direct
http://loanconsolidation.ed.gov/
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Perkins Loans are Special
• Federal Perkins Loans are only eligible when part of a Federal Consolidation Loan, and borrowers are urged to seek advice about the pros and cons regarding consolidating Perkins loans.
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Qualifying Employment
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Government 501(c)(3) Non-profit
AmeriCorps Position Peace Corps
“Public Service
Organization”
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What Counts as a Government Job?
• Government employment includes work for:– local, State, Federal, and Tribal governments– government organizations, agencies, and entities– but not service as a member of the U.S. Congress
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What Counts as a “Public Service Organization”?
• The organization provides specific listed services including “public interest law services” and:
– gets at least some government funding and;
– is not "a business organized for profit, a labor union, a partisan political organization, or an organization engaged in religious activities…"
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Qualifying Employment
Full-time, paid work
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Definition of “Full-Time”
• Working in qualifying employment in one or more jobs for the greater of—
– An annual average of at least 30 hours per week, or – For a contractual or employment period of at least 8
months, an average of 30 hours per week; or– Unless the qualifying employment is with two or more
employers, the number of hours the employer considers full-time.
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Qualifying Payments
Income-Based Repayment
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What is a Qualifying Loan Payment?
• A person must be working full-time in an eligible public service position AND making monthly loan payments for 120 months on eligible Federal Direct Loans as part of:
– Income Contingent Repayment (ICR) plan, or
– Income Based Repayment (IBR) plan (available July 2009), or
– A standard 10-year repayment plan, or
– At least the monthly amount required under Standard Repayment over a 10-year repayment period.
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Non-Qualifying Payments
Any term of years longer than 10-years
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What is NOT a Qualifying Loan Payment?
• 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)
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Hypotheticals
Crunch your own numbers
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Hypothetical Recent Grad AttorneyIBR & PSLF after 10 years
Eligible Debt: $120,000
Starting Salary: $40,000
Monthly Payment Year 1: $297
Monthly Payment Year 10: $447
Total Paid: $44,102
Total Forgiven: $168,898
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Hypothetical Recent Grad Attorney30 years
Eligible Debt: $120,000
Starting Salary: $40,000
Monthly Payment Years 1-30: $860
Total Paid: $309,495
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Hypothetical Experienced AttorneyIBR & PSLF after 10 years
Eligible Debt: $60,000
Current Salary: $70,000
Monthly Payment Year 1: $672
Monthly Payment Year 10: $690
Total Paid: $82,635
Total Forgiven: $422
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Hypothetical Experienced Public Interest Attorney – 20 more years
Eligible Debt: $60,000
Current Salary: $70,000
Monthly Payment Years 1-20 $458
Total Paid: $109,922
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What About Taxes on Loan Forgiveness?
Public Service Forgiveness•Not
Taxable
25 Year IBR Forgiveness•Currently
Taxable•H.R. 2492
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Law School LRAPs
State-Based LRAPs
Employer LRAPs
CCRAA: Public Service Loan Forgiveness
HEOA: Prosecutors,
Defenders and Legal Aid
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The John R. Justice Prosecutors
and Defenders Incentive Act
The Legal Assistance Loan
Repayment Program
Higher Education Reauthorization LRAPs
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• www.equaljusticeworks.org
Work through the Checklist
• www.IBRinfo.org
Sign up for e-mail updates
• www.equaljusticeworks.org
Post questions on the Student Debt Forum
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