Transcript Document

Income-Driven Repayment
Plans & Public Service Loan
Forgiveness
U.S. Department of Education
Income-Driven Plans - Overview
•
Three main plans
•
Income-Contingent Repayment Plan (ICR) – 1994
•
Direct Loan Program only
• More information available at StudentAid.gov/ICR
•
Income-Based Repayment Plan (IBR) – 2009
•
Available in both the Direct Loan and FFEL Program
• More information available at StudentAid.gov/IBR
•
Pay As You Earn Plan – 2012
•
Direct Loan Program only
• For new borrowers in FY 2008 who receive new loans in FY 2012
• Modeled on IBR, incorporating statutory IBR changes scheduled to take effect for
new borrowers in 2014
• More information available at StudentAid.gov/PayAsYouEarn
2
Income-Driven Plans – Eligible Borrowers
•
ICR:
•
•
Direct Loan borrowers with eligible loans
IBR:
•
Direct Loan and FFEL Program borrowers with eligible loans and
• Their payments would be lower on IBR relative to what would have been paid
under the 10-year standard repayment plan (called “partial financial hardship”)
•
Pay As You Earn:
•
Direct Loan borrowers with eligible loans
• Must be a new borrower on/after 10/1/2007 who received new loan on/after
10/1/2011 and
• Their payments would be lower on Pay As You Earn relative to what would have
been paid under the 10-year standard repayment plan (called “partial financial
hardship”)
3
Income-Driven Plans – Eligible Loans
•
ICR:
•
•
•
IBR:
•
•
All Direct and FFEL Program loans except parent PLUS loans and
Consolidation Loans that repaid parent PLUS loans
Pay As You Earn:
•
4
All Direct Loans are eligible except parent PLUS Loans and pre7/1/2006 Direct PLUS Consolidation Loans
Direct Consolidation Loans made on/after 7/1/2006 that repaid
parent PLUS loans are eligible
All Direct Loans are eligible except parent PLUS loans and
Consolidation Loans that repaid parent PLUS loans
Income-Driven Plans – Payment Amounts
•
Under ICR, borrowers pay the lesser of:
•
12-year standard repayment schedule multiplied by income percentage factor
(payment based on loan debt and income) or
• 20% of discretionary income (payment based only on income)
•
Under IBR, borrowers pay the lesser of:
•
15% of discretionary income (income-based payments) or
• What they would have paid under the 10-year standard repayment plan (nonincome-based payments)
•
Under Pay As You Earn, borrowers pay the lesser of:
•
10% of discretionary income (income-based payments) or
• What they would have paid under the 10-year standard repayment plan (nonincome-based payments)
For more on income percentage factors in ICR, see 77 FR 30266, available
at: https://federalregister.gov/a/2012-12420
5
Income-Driven Plans – Loan Forgiveness
•
•
•
•
All three plans provide for forgiveness
For ICR and IBR, remaining balance forgiven after 25
years of qualifying repayment
For Pay As You Earn, remaining balance forgiven after 20
years of qualifying repayment
For all three plans, qualifying repayment includes:
•
Payments under an income-driven plan
• Payments under the 10-year standard repayment plan (or any other repayment
plan with a payment amount at least equal to the 10-year standard plan amount)
or
• Economic hardship deferment
•
6
According to the IRS, the forgiven amount is considered
taxable income
Applying: Income Documentation
•
•
•
Borrower must submit income documentation when
applying
Eligibility (IBR & Pay As You Earn) and payment amount
(all three plans) usually based on a borrower’s AGI
Borrower may document AGI through:
•
•
•
7
The electronic application (uses same method as IRS data retrieval
tool for the FAFSA to document AGI)
A paper copy of a 1040, 1040A, or 1040EZ (signed or unsigned)
An IRS Tax Return Transcript
Applying: Income Documentation
•
•
If AGI is not available or does not reasonably reflect
current income, borrower can submit alternative
documentation of income (ADOI)
Borrowers must provide documentation of all taxable
income, e.g., pay stubs, unemployment benefits, etc.
•
•
8
Loan holder estimates annual taxable income based on this
documentation
Borrowers do not provide documentation of untaxed
income, such as Supplemental Security Income or
welfare
Recertifying: Income and Family Size
•
Under all three plans, borrowers are required to submit updated income
documentation annually
• Failure to submit documentation timely will lead to:
•
•
•
A monthly payment amount that is what it would have been on the 10-year standard
repayment plan (non-income-based payment) and
Interest capitalization
Borrowers must also annually certify their family size or a family size of one
will be used
• The reevaluation date is based on when the borrower initially entered the
plan (anniversary date)
• Borrower can also submit documentation early, if their circumstances have
changed, to receive a lower payment amount. This changes their
anniversary date
• Borrowers can use the electronic application to recertify their income and
family size
9
Public Service Loan Forgiveness
•
Public Service Loan Forgiveness (PSLF) provides for
forgiveness of a Direct Loan borrower’s remaining loan
balance if the borrower:
•
•
•
•
•
10
Makes 120 full, on-time payments after October 1, 2007
Makes each payment under a qualifying repayment plan
Makes each payment while employed full-time by a qualifying
organization
Borrower must also be employed by a qualifying
organization at the time that the borrower applies for and
receives PSLF
According to the IRS, the forgiven amount is not treated
as taxable income
PSLF – Qualifying Payments
•
Borrower must make 120 separate monthly payments. They:
•
•
•
•
•
Multiple, partial payments during the borrower’s monthly billing cycle
will qualify if they add up to equal the borrower’s monthly payment
amount
A borrower will not receive credit for more than one payment toward
PSLF if the borrower makes a lump sum payment (e.g., makes a
single payment equal to two or more full monthly payments)
•
11
Do not need to be consecutive
Must be for the full scheduled payment under the repayment plan
Must be made within 15 days of the due date
Exception for AmeriCorps and Peace Corps borrowers who make lump
sum payments using education award or transition payment
PSLF – Qualifying Repayment Plan
•
•
Each of the 120 payments must be made under a qualifying
repayment plan
Qualifying repayment plans:
•
•
•
•
Non-qualifying repayment plans include:
•
•
•
•
12
10-year Standard Repayment Plan
IBR, ICR, Pay As You Earn plans and
Any other payment plan where the payment amount at least equals the 10year Standard Repayment Plan amount
Extended (Fixed or Graduated)
Graduated and
Consolidation Standard with term greater than 10-years
Income-driven plans are most likely to leave a remaining balance for
forgiveness after 120 qualifying payments
PSLF – Eligible Loans
•
•
PSLF is only for Direct Loans
All Direct Loans qualify
•
Parent Direct PLUS Loans are eligible for PSLF, but cannot be repaid under
income-driven plans
• Borrowers may consolidate parent PLUS Loans and repay under ICR
•
FFEL Program and Perkins Loans do not qualify, but can
be consolidated into a Direct Consolidation Loan
•
Borrower consolidating Perkins Loans will lose Perkins-only cancellation benefits
they may have otherwise been able to receive
• Payments made on loans that are later consolidated do not count toward 120
payments for PSLF. Borrower must make 120 qualifying payments on the Direct
Consolidation Loan
13
PSLF – Qualifying Employment
•
•
Each of the 120 payments must have been made during
a period of qualifying employment
Qualifying employment includes any job at:
•
•
•
A government organization
A not-for-profit, 501(c)(3) organization or
Any other not-for-profit organization that is not a labor union or
partisan political organization and that provides public services in
the following categories:
•
•
14
Emergency management, military service, public safety, law enforcement, public
interest legal services, early childhood education, public service for individuals
with disabilities, public health, public education, public library services, school
library services, or other school-based services
Borrower can work at multiple organizations while making the
required120 payments
PSLF – Qualifying Employment
•
•
Must be a full-time employee or work multiple part-time jobs that
equal full time
Full-time is whatever the employer considers full-time, but must be at
least an annual average of 30 hours per week
•
•
•
15
For borrowers with multiple employers, full time is an annual average of at least 30
hours per week
Exception for employees under contract for at least eight months per year (e.g.,
teachers), full time is an average of at least 30 hours per week
For borrowers working for a not-for-profit organization (501(c)(3) or
otherwise) with job duties that include religious instruction, worship
services, or proselytizing, the hours spent on those activities cannot
be factored into meeting the full-time employee requirement
PSLF – Employment Certification
•
On January 31, 2012, the Department released a voluntary Employment
Certification Form that borrowers can submit to the Department for a
determination of whether their employment and payments qualify for PSLF
•
•
•
•
•
•
Borrower has employer complete employment verification section
Borrower submits form to FedLoan Servicing (regardless of who current servicer is)
FedLoan Servicing determines whether employment qualifies
If employment qualifies, borrower’s loans are transferred to FedLoan Servicing, for a
determination of how many qualifying payments were made during the period of
employment
Borrowers loans remain at FedLoan servicing permanently
Borrower can submit the form as often as annually
For more, including Q&As, see StudentAid.gov/PublicService
16
PSLF – Employment Certification
•
•
•
17
Employment Certification Form is not an application for
forgiveness
Borrower must make 120 qualifying payments after
October 1, 2007, so no borrowers can qualify until 2017
at the earliest
PSLF Forgiveness Application will be developed and
released prior to earliest date of eligibility for PSLF