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Student Loans

01

Overview

02

Helpful Terms & Tools

03

Repayment & References

Forgiveness and Repayment

How to Get Student Loan Forgiveness

Who doesn’t want their debt wiped away? While eligibility varies by loan type, your repayment plan, and your job, there are some options to have federal student loan debt forgiven. Here are a number of programs that offer a path to eliminating some of that debt:

Forgiveness for Income-Driven Plans

Who qualifies: Borrowers enrolled in an income-driven repayment plan

Time to forgiveness: 20 years for undergraduate debt and 25 years for graduate debt

Public Service Loan Forgiveness

Who qualifies: Government or a nonprofit workers

Time to forgiveness: 10 years

Teacher Loan Forgiveness

Who qualifies: Full-time teachers who work in a low-income public school for at least five years

Time to forgiveness: 5 years

Perkins Loan Forgiveness

Borrowers with a Perkins loan who have worked in an eligible public service job for at least one year.

Time to forgiveness: 5 years

Some states also have special loan forgiveness programs. Check with your state’s official website for more information.

Did You Know

There are several ways that you can get your Federal student loan balance forgiven. If you are looking to go into government, non-profit, or the teaching field, you should look into what options you have to trade your service for forgiveness.

Federal Repayment Plan

The right federal student loan repayment plan for you depends on factors such as your income, family size and job (or the job you think you are going to get). Here’s how to sort through your plan options.

Standard Plan. The standard plan is the default federal repayment plan. On it, you’ll make 120 equal payments (one per month for 10 years). If you can afford the standard plan, you’ll pay less in interest and pay off your loans faster than you would on other federal repayment plans.

Extended Plan: The extended plan allows you to make lower monthly payments over a 25 year period (instead of 10 in the standard plan). Monthly payments can be fixed or graduated over the loan period and are generally lower than the standard or Graduated plans.

Graduated Plan. This plan assumes a low income that increases steadily over time. Increases happen every two years and the loan period is 10 years. The payments are at least equal to the amount of interest that accrues between your payments.

Income-Driven Plans. There are four income-driven plans available, set at an amount that is intended to be affordable based on your income and family size. Generally speaking, income-driven repayment plans are based on a percentage of your income, with the exact percentage determined by the plan:

  • REPAYE Plan: 10% of your discretionary income
  • PAYE Plan: 10% of your discretionary income, but never more than what you would pay on the 10 year standard plan.
  • IBR Plan: 10% of your discretionary income, but never more than what you would pay on the 10 year standard plan.
  • ICR Plan: The lesser of either 20% of your discretionary income OR what you would pay with a 12 year fixed payment plan

Income-Sensitive Plan. The payment under this plan fluctuates based on your annual income. It increases or decreases based on your income but is set to a maximum of a 10 year repayment time period.

The pros and cons of each of these plans are complex, but you should weigh your options carefully. The standard plan is generally going to pay off your loans in the fastest time frame, which is generally preferred (the less time you have the loan out the less you will pay in interest, so it is best if you can buckle down and get this necessary debt paid off). However, if you are looking to go into government, nonprofit, or the teaching field, and Income-driven plan that leads to loan forgiveness might be a better option.

Work with a financial expert, or talk to one of our experts at Purse Strings, to help you figure out the best option for you.

References

1. Source: http://fortune.com/2017/05/24/women-student-loan-debt-study/

2. Source: https://www.aauw.org/research/deeper-in-debt/

3. Source: https://www.npr.org/2014/04/03/298800950/student-debt-weighs-down-women-more-blame-the- wage-gap

4. Source: https://www.nerdwallet.com/blog/loans/student-loans/student-loan-forgiveness/

5. Source: https://studentloanhero.com/featured/women-in-debt-student-loans/

6. Source: https://studentloanhero.com/calculators/student-loan-prepayment-calculator/

7. Source: https://studentloanhero.com/calculators/student-loan-refinancing-calculator/

8. Source: https://studentloanhero.com/calculators/student-loan-income-based-repayment-calculator/

9. Source: https://studentloanhero.com/calculators/income-contingent-repayment-calculator/

10. Source: https://www.wikipedia.org/

11. Source: https://studentloanhero.com/featured/women-in-debt-student-loans/

12. Source: https://www.nerdwallet.com/blog/loans/student-loans/student-loan-repayment-plans/?edusidebar

13. Source: https://www.nerdwallet.com/blog/loans/student-loans/student-loan-repayment-plans/?edusidebar

This Guide

01

Student Loans Part 1 - Overview

02

Student Loans Part 2 - Helpful Terms & Tools

03

Student Loans Part 3 - Repayment & References

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