How to Make Student Loan Payments Based on Your Income

Maybe you’re just getting out of school and you got a letter from your student loan servicer about repayment, or maybe you read on a blog or in the newspaper about an income-driven repayment plan. Maybe you’re not really sure what they are, how they work, or what they could mean for you. Let me give you the fundamentals.

First, let me explain the naming. “Income-driven repayment” is an umbrella term for three different repayment plans available to those with federal student loans:

Notice how the names of all three plans reference “income” or “earnings”? Well, that’s because, under these plans, your payment amount is based on how much money you make. To really understand the differences between income-driven and “traditional” repayment plans, you must understand how your payment amount is calculated under each type of repayment plan.

How Monthly Payments Are Calculated

“Traditional” repayment plans are those such as the Standard and Extended Repayment plans. These traditionalists take three variables—the interest rate, principal balance, and repayment period—and determine the least amount of money that you can pay each month to pay the loan off by the end of the repayment period (usually 10-25 years, but sometimes as much as 30 years). This means that borrowing more, having a higher interest rate, or having a shorter repayment period will increase your monthly payment (and vice versa). Those three variables are all the traditional repayment plans care about—they don’t care if you can afford that payment, they just want your loan to be paid off within a specific time frame.

Income-driven repayment plans take these variables and stand them on their heads. These plans say, “you’ll pay what you can afford: a percentage of your ‘discretionary income’” (hint: that’s something less than your total income). Depending on the plan, that may be 10%, 15%, or something else. What you ultimately pay depends on the plan you choose and when you borrowed, but in all cases, it should be something you can afford. Sometimes, it can be as low as $0 per month.

Student Loan Forgiveness and the Income-Driven Repayment Plans

Because your payment under the income-driven repayment plans is not calculated to ensure that your loan is paid off within a specific time frame, the plans have another special feature: loan forgiveness. These plans do have a repayment period—20 or 25 years. However, it’s not the point at which your loan must be paid off; instead, it serves as a counter toward loan forgiveness. Under these plans, if your loan is not repaid in full at the end of your repayment period—20 or 25 years—then the remaining balance will be forgiven. Let me be clear: this is not to say that everyone who selects an income-driven repayment plan will receive forgiveness. You may end up paying your loan off in full before you’re eligible for some forgiveness. Because your payment is based on your income, your payment changes when your income rises (or falls). Your income is the “x” factor, and we don’t know what will happen to it in the future. Under these plans, then, you may pay your loan off in full, or not, but the income-driven repayment plans are happy either way.

What else affects whether you will receive loan forgiveness? Well, it’s those familiar variables of loan balance and interest rate. Remember, interest accrues each day on whatever your principal balance is. The income-driven repayment plans do not change this fact. So, even though your payment isn’t related to how much interest is accruing, that interest still accrues and must still be paid before you can pay down the principal balance on your loan. Ultimately, because your payment is less than it would be under another plan and may even be less than the amount of interest that accrues on your loan, then you will pay down your principal balance more slowly and increase the likelihood of receiving loan forgiveness. This also means that your loan will cost you more over time. Does this mean that you shouldn’t choose an income-driven repayment plan? Of course not! But, I wouldn’t be doing my job if I didn’t explain that there was some sort of cost to receiving this benefit.

Disclaimers

To be a good bureaucrat, I need to give you a few disclaimers before I wrap this up:

  • If you receive loan forgiveness under an Income-Driven Repayment Plan, it may be considered taxable income by the Internal Revenue Service.
  • The Income-Based and Pay As You Earn Repayment plans both have an eligibility criteria that tests to see whether you “need” to enter the plan—this test checks how much federal student loan debt you have relative to your income.
  • There are loan-based eligibility criteria that I didn’t even mention, but know that these plans are only available for federal student loans—loans made under the Direct Loan and Federal Family Education Loan Programs, to be specific.
  • If you are married, how you file your federal income tax return matters; sometimes it matters a lot.

How to Apply

In closing, let me give you some actionable steps that you can take:

  • Use the Repayment Estimator to model your eligibility and payment amount for an income-driven repayment plan.
  • If you have still questions, call your loan servicer and discuss whether one of these plans is a good fit for you.
  • Apply online at StudentLoans.gov. Because this stuff is complicated, check the box that allows your loan servicer to put you on the income-driven repayment plan with the lowest monthly payment amount. 

The English language was not marred through the use of acronyms in this blog post. Ian Foss has worked for the Department of Education since 2010, and, thanks to the Income-Based Repayment Plan, has been able to eat more than just ramen noodles since he finished school.

6 Things High School Grads Need to Do Before Leaving for College

graduation

Getting ready for your last high school prom and counting down the days till graduation are all you can think about.  Yes, freedom and plans for a fun-filled summer are just around the corner.  Before you know it, you’ll be loading up your belongings in the family minivan and headed off to college.  You’re so ready, right?  Well, maybe not.  Here are some tips for things to do this summer before you head off to college.

Downsize, Get Organized & Learn How to Do Your Own Laundry

You’re not going to be able to take your whole closet and every cherished belonging with you to the dorm.  Start downsizing now and make a list of all the things you’ll need to take with you.  A clean and tidy space will make things a lot more manageable.  Most likely you’ll go home a time or two on break and you can swap out things that you don’t need for things that you do.  But, in between those trips home, you’ll need to learn how to do laundry.  Those whites can turn into some interesting colors and transform into a smaller size if you don’t know your way around a washer and dryer.

Understand Your Financial Situation

Each family’s situation is different – make sure you understand what your family may or may not be able to contribute.  You should’ve already applied for financial aid.  If not, you need to complete the Free Application For Federal Student Aid (FAFSA) ASAP!  Make sure you list on the application the school code of the college you plan to attend so your information is sent to that school.  If you still haven’t decided it’s best to list any school you think you may attend.  The financial aid office will then notify you of any financial aid you might be eligible for.  Know what each of those types of aid is and in what order you should accept them.  Visit StudentAid.gov for information on planning and paying for college.  Do you have enough money to pay for school?  Will you need to work part-time?  Make a budget and know what you can spend on certain things.

Get a Good Calendar and Prepare for a Whole New World of Time Management

One of the biggest challenges for a lot of you will be time management. When you head off to college, you won’t have somebody there to wake you up, make you breakfast and send you out the door in clean clothes with completed homework in hand.  Set yourself up early with a class schedule (make a course syllabus your new best friend) and a system that works for you.  You need to know deadlines for registration, papers, financial aid, coursework and everything in between.  Your chance of succeeding academically will rapidly evaporate if you don’t manage your time well.  You’re worth the investment – manage it well.

Craft a Good Resume and Learn How to Network

No, don’t wait until you’re approaching college graduation to write a cover letter and resume, you need one now.  Having a compelling and professional resume and cover letter is vital to applying for part-time jobs, internships, etc.   You might want to also consider changing your email address.  Employers probably won’t be impressed with an email address like justheretoparty@XXmail.com.  Work experience can be just as important as good grades when looking for jobs after college graduation.   Internships not only provide you with knowledgeable experiences in your field, but they also provide great networking opportunities.  Don’t settle in and nest, put yourself out there and go to as many networking events as possible.

Embrace Coupons and Master the Art of a Good Deal

Another difficult thing to learn is skipping those unnecessary splurges.  Yes, I know it’s all about YOLO but you need to embrace BOGO.  Coupons aren’t just for stay at home moms anymore.  Scoring deals whether in newspapers, magazines or with online sites like Groupon and Living Social it’s easier than ever.  But don’t get so caught up in the deals that you buy vouchers for and you don’t end up using.  That can cost rather than save you money.  Save those splurges for when you score a great “Buy One Get One” free or other greatly discounted offer.    Ask about student discounts and if available a studentadvantage card.  Start practicing this summer.  It’ll impress your friends and it’ll be a little more money in your pocket when you get to campus.  Another great way to save money is buying used textbooks rather than new.  Search sites like bigwords.com, Amazon, and TextbooksRUs to name a few.  If you buy new and then resell them back to the college bookstore check online sites first for what they’re worth.  College bookstore buy back rates are sometimes as low as 10% of what you paid for it new.  Lots of students are also now renting textbooks on sites like chegg.com.

Learn How to Keep You and Your Things Safe

Yes, you need to remember to lock your dorm room and place that lock on your laptop.  Losing your laptop can wreak havoc on your studies and a theft due to an unlocked door can also ruin your relationship with your roommate.  Start practicing being more aware of your surroundings and keeping yourself safe.  Program your school’s campus security number into your phone.  You never know when you might need it.  Safety also applies to protecting your social security number, PIN and passwords.  Your social security number is one of the main identifiers when checking on things like financial aid, grades, and registering for classes.  Make sure all your passwords and important numbers are not on a post-it-note on your desk.  Store them in a secure place.  Not protecting your identity and important information can have lasting long-term effects on your ability to get a job and apply for credit.

Congratulations on a job well done and making the decision to advance your education!

Susan Thares is the digital engagement lead for the U.S. Department of Education’s Office of Federal Student Aid. 

5 Ways to Pay Off Your Student Loans Faster

PayOffYourStudentLoansFaster

The first thing people say when they find out where I work: “Can you delete my student loans for me?”

If only I had that power. Just like many of you, I am a student loan borrower. Each month, my federal student loan servicer, withdraws my $381.35 student loan payment from my bank account and I still cringe every time. (Do you know how many pairs of shoes I could buy with that money?) Point is, I understand what you’re going through.

That said, there are manageable ways to pay off your student loans faster than you had planned and save yourself money by doing so!

Here are some ideas:

  1. Pay Right Away Even though you’re usually not required to, consider making student loan payments during your grace period or while you’re still in school. If you’re short on cash, consider at least paying enough each month to cover the amount of interest you’re accruing. That way your interest doesn’t capitalize and get added to your principal balance. Not doing this was one of the biggest mistakes I made with my student loans.
  2. Sign up for Automatic Debit If you sign up for automatic debit, your student loan servicer will automatically deduct your student loan payment from your bank account each month. Not only does this help ensure that you make payments on time, but you may also be able to get an interest rate deduction for enrolling. Contact your loan servicer to see if your loan is eligible for this benefit.
  3. Pay More than Your Minimum Payment Even if it’s $5 a month!  Paying a little extra each month can reduce the interest you pay and reduce your total cost of your loan over time. If you want to ensure that your loan is paid off faster, make sure you tell your loan servicer that the extra amount you’re paying is not intended to be put toward future payments. If given the option, ask your servicer if the additional payment amount can be allocated to your higher interest loans first.
  4. Use Your Tax Refund One easy way to pay off your loan faster is to dedicate your tax refund to paying off some of your student loan debt. Part of the reason you may have gotten a refund in the first place is because you get a tax deduction for paying student loan interest. Might as well be smart about the way you spend it.
  5. Seek Out Forgiveness and Repayment Options There are a number of situations under which you can have your federal student loan balance forgiven. There are forgiveness and repayment programs for teachers, public servants, members of the United States Armed Forces, and more. Most of these programs have very specific eligibility requirements, but if you think you might qualify, you should definitely do some research. Also, research whether your employer offers repayment assistance for employees with student loans. There are many who do!

Nicole Callahan is a Digital Engagement Strategist at The U.S. Department of Education’s office of Federal Student Aid. She is scheduled to finish repaying her student loans in 2021, but is hoping that by taking her own advice, she will finish much faster.

 

Student Loan Forgiveness (and Other Ways the Government Can Help You Repay Your Loans)

Maybe you’ve heard or read about student loan forgiveness and you’re wondering what it is or if it is really possible? Or maybe you know a little about it and you want to find out if you qualify. Well, you’ve come to the right place. We’ll answer these questions and tell you where to go to learn more.

What is loan forgiveness?

Loan forgiveness is the cancellation of all or some portion of your federal student loan balance. Yes, that’s right—cancellation of your loan balance.  If your loan is forgiven, you are no longer required to repay that loan.

Is it really possible to have your student loans forgiven?

Yes! However, there are very specific eligibility requirements for each situation in which you can apply for loan forgiveness. If you think you may qualify, it’s definitely worth investigating.

How do I get my loans forgiven?

There are a number of situations under which you can have your federal student loan balance forgiven, and we’ve provided a few in this post. You will, however, want to research your options at StudentAid.gov/repay and contact your loan servicer for any questions you may have about student loan forgiveness.

A couple examples of situations in which your federal student loans may be forgiven include:

  • Teacher Loan Forgiveness: If you teach full-time for five complete and consecutive academic years in certain elementary and secondary schools and educational service agencies that serve low-income families, and meet other qualifications, you may be eligible for forgiveness of up to a combined total of $17,500 on certain federal student loans. For details about this program, see Teacher Loan Forgiveness.
  • Public Service Loan Forgiveness (PSLF): If you work full-time in certain public service jobs you may qualify for forgiveness of the remaining balance of your Direct Loans after you’ve made 120 qualifying payments on those loans—that’s usually about 10 years of payments. Serving in the Peace Corps or AmeriCorps is considered qualifying employment. For loan repayment and borrower eligibility requirements, see Public Service Loan Forgiveness.

There are additional situations that allow you to apply for cancellation of your federal student loans. For example, if you are totally and permanently disabled, a member of the U.S. armed forces (serving in area of hostilities), a member of the Peace Corps, or a law enforcement or corrections officer, you may be eligible for cancellation of a portion of your federal student loan. Learn more about how you may qualify for loan forgiveness and contact your loan servicer with questions.

Are there other ways in which I can get help repaying my loans?

There are additional government programs that provide student loan repayment assistance for individuals who provide certain types of service. A couple examples include:

  • Military Service: In acknowledgement of your service to our country, there are special benefits and repayment options for your student loans available from the U.S. Department of Education and the U.S. Department of Defense. Learn about federal student loan benefits for members of the U.S. Armed Forces.
  • AmeriCorps: The Segal AmeriCorps Education Award is a post-service benefit received by participants who complete a term of national service in an approved AmeriCorps program—AmeriCorps VISTA, AmeriCorps NCCC, or AmeriCorps State and National. An AmeriCorps member serving in a full-time term of national service is required to complete the service within 12 months. Upon successful completion of the service, members are eligible to receive a Segal AmeriCorps Education Award which can be used to pay educational costs at eligible postsecondary institutions, as well as to repay qualified student loans.

Remember, there are resources available to help you repay your loans. In addition to loan forgiveness and other benefit programs, you also have other options if you find yourself in a situation where you’re having trouble making your loan payments. Make sure to discuss your options with your loan servicer.

Lisa Rhodes is a writer at the Department of Education’s office of Federal Student Aid.

What You Should Know About Your Federal Student Loan Servicer

LoanServicer

You received a federal student loan and now it’s time to repay your loan. If you’re like most student loan borrowers, you may find the repayment process a little overwhelming. But you have an important resource—your student loan servicer—to help you navigate the repayment process.

What is a loan servicer?

A loan servicer handles the billing and other services on your federal student loans. The U.S. Department of Education assigns your loan to a servicer, and the servicer will assist you with repayment and any questions you may have about your federal student loan.

What’s so important about my loan servicer?

There are several reasons why your loan servicer is important, including the fact that you’ll make your loan payments to your servicer.

Your servicer will help you:

How do I find out who my loan servicer is?

To view information about all of your federal student loans including contact information for your loan servicer, log in to “My Federal Student Aid.” You’ll need your Federal Student Aid PIN, so make sure you have that handy. Once you’re logged in, select “Your Federal Student Loan Summary” to view your loan information. Note: If you have multiple federal student loans you may have more than one loan servicer, so be sure select each loan to see information specific to that loan.

Just remember that your loan servicer will help you throughout the loan repayment process, so make sure to keep in touch with them, especially if your financial circumstances change.

Lisa Rhodes is a writer at the Department of Education’s office of Federal Student Aid.

 

Don’t Fall Behind on Your Student Loan Payments

DontFallBehind

Life can throw some unexpected curves at you. And when this happens, you often wind up with unwelcome expenses. In these hectic moments, it might seem impossible to think about your federal student loan payments, but that’s exactly what you should do.

If you are having trouble making your loan payments, you should remember that federal student loans offer many flexible repayment options. It might seem easier to ignore your student loans, but that won’t make them go away. In fact, defaulting on a federal student loan (not making payments for more than 270 days) can have serious consequences. If your loan defaults:

  • your credit score will be negatively impacted, which could prevent you from qualifying for a car or home loan and may jeopardize your future employment opportunities;
  • your loan may be placed with a collection agency, and you will be responsible for paying the collection fees; and
  • your paycheck or federal income tax refund could be withheld to help repay your debt.

But, this doesn’t have to happen to you. When you’re struggling to make your student loan payments, you should contact your loan servicer. Your loan servicer can discuss your options for lowering or temporarily postponing your payments.

Here are some options you might want to consider:

  • Switch your repayment plan: You may be able to change your repayment plan to one with lower monthly payments. Just beware that lowering your monthly payments may result in paying more over the life of the loan. You can compare your payments under each repayment plan using our Repayment Estimator.
  • Ask for a deferment or forbearance:deferment or forbearance allows you to temporarily postpone or reduce your federal student loan payments. You may qualify for a deferment or forbearance for a variety of reasons, including financial/economic hardship, unemployment or military service. It’s important to note that, in most cases, interest will continue to accrue on your loans when they are in a deferment or forbearance status (except for subsidized loans in deferment).
  • Consolidate your loans: If you have multiple federal student loans, you may consider combining them into one loan.  A Direct Consolidation Loan often results in a lower monthly payment, but does extend the amount of time you have to repay your loan which causes you to pay more over the life of the loan. Find out more about the pros and cons of loan consolidation.

For more information about options for successfully managing your loans, visit https://studentaid.ed.gov/repay-loans or contact your loan servicer.

Tara Marini is a communication analyst at the Department of Education’s office of Federal Student Aid.

Choosing a Federal Student Loan Repayment Plan

Choosing a Federal Student Loan Repayment PlanIf you have federal student loans, it’s important that you understand your loan repayment options. For example, did you know that you have the option to choose a repayment plan? That’s right. While your loan servicer (the company that handles the billing and other services on your federal education loan) will automatically place your loan on the Standard Repayment Plan, you CAN choose another plan.

The Department of Education offers several traditional and income-driven repayment plans with different payment options. So, make sure to take the time to understand these options and find the plan that works best for you.

Generally, our repayment plans offer three types of payments:

  • Fixed Payments: Our Standard Repayment Plan and Extended Repayment Plan offer payments that remain the same amount for the life of the loan.
  • Graduated Payments: Our Graduated Repayment Plan and Extended-Graduated Plan offer payments that start out low and gradually increase every two years.
  • Income-Driven Payments: Our three income-driven repayment plans offer payments that are calculated based on your income.

Choosing a repayment plan can feel overwhelming. Don’t worry—there are several resources available to help you understand the repayments plans, determine your eligibility for each plan, and make the right decision for you.

  • Watch our Repayment: What to Expect video to get a high-level overview of the repayment plans.
  • Check out our Repayment Plans infographic for an easy-to-understand visual that will give you some key points to keep in mind as you are choosing a repayment plan.
  • Read our Repay Your Federal Student Loans fact sheet for additional information on loan repayment and the repayment plans.
  • Get detailed information about each repayment plan on our website.
  • Use our online Repayment Estimator to find out which plans you may be eligible for and to estimate how much you would pay under each plan. (If you log-in, the Repayment Estimator will use your actual loan balance to estimate your eligibility and payment information.)
  • Contact your loan servicer to discuss your options and choose a federal student loan repayment plan that’s best for you.

Remember, the repayment plans discussed here are for federal loans only. If you have private loans, check with your lender about available repayment options.

For more information on federal student loan repayment plans, visit Studentaid.ed.gov/repay-loans.

Tara Marini is a communication analyst at the Department of Education’s office of Federal 

Is Student Loan Consolidation Right For You?

ConsolidateLoans

A Direct Consolidation Loan allows you to combine multiple federal education loans into one loan. Before making the decision to consolidate your loans, you’ll want to carefully consider whether loan consolidation is the best option for you. Keep in mind, once your loans are combined into a Direct Consolidation Loan, they cannot be removed.

Advantages of consolidating your student loans:

  • Simplified Payments
    You’ll have a single monthly payment and a single lender (the U.S. Department of Education) instead of multiple payments and multiple lenders.
  • It’s free!
    It’s free to apply to consolidate your federal student loans. If you are contacted by someone offering to consolidate your loans for a fee, you are not dealing with the U.S. Department of Education.
  • Fixed Interest Rate
    Direct Consolidation Loans have a fixed interest rate, meaning your interest rate won’t change year to year. The fixed interest rate is based on the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of 1%.
  • Lower Monthly Payments
    You may get a longer time to repay your loans, often resulting in lower monthly payments.

Disadvantages of consolidating your student loans:

  • Loss of Borrower Benefits
    You may lose any borrower benefits, such as interest rate discounts, principal rebates, or some loan cancellation benefits, offered with the original loans.
  • More Interest Paid Over Time
    You will likely pay more money in interest over the life of the loan. The amount of time you have to repay your Direct Consolidation Loan can vary from 10-30 years depending on the amount of your Direct Consolidation Loan and the amount of your other student loan debt. The longer it takes to repay your loan, the more you will make in interest payments.

In weighing your options, be sure to compare your current monthly payments to what your monthly payments would be if you consolidated your loans. If you’re just interested in temporarily lowering your monthly payment, consolidation might not be the answer.  Contact your loan servicer to consider alternative options such as deferment or forbearance.

To find out more information about loan consolidation, including eligibility requirements, visit https://studentaid.ed.gov/repay-loans/consolidation.

Tara Marini is a communication analyst at the Department of Education’s office of Federal Student Aid.

A School Counselor’s Tips on Tying up Loose Ends before You Head Off to College

before_college

As a high school counselor in a rural community I’ve been fortunate to work with students and families and guide them through planning and preparing for college.  I’m also a single parent of two kids who survived the college going experience and graduated so I understand the somewhat overwhelming and daunting task it can be, especially for families who have not been through it before.   Once those scholarship applications have been submitted, the FAFSA completed and college acceptances received there are still some things students and parents need to do.

  1. Be courteous and notify the colleges and universities that you applied to but are not planning to attend of your decision.  It will free up their resources to assist other students.
  2. Follow through on scholarship requirements.  Some students, even though they were initially awarded a scholarship, didn’t actually receive the money because they didn’t complete all the requirements.  It may have been that they didn’t file all the necessary paperwork, or meet with their advisor or failed to make the necessary grades. Also remember, scholarships are free/gift money.  Don’t forget to follow up with a simple thank you note to the donor or organization.
  3. Make a financial plan and discuss expectations.  Apply for a debit/credit card if you don’t already have one.  Set limits and create a realistic budget that will carry you through the school year.  StudentAid.gov/budget is a great resource for college budget planning.
  4. Get connected with your new college email system.  This is how you’ll receive information from them.  Reply promptly to requests for information or documentation or you might lose out on some financial aid or end up with the least popular option for your on-campus work study job.
  5. Get credit for your classes. If you took college classes in high school be sure to request an official transcript from the college that you took the classes from be mailed to your future college.  There might be a small fee involved.  What is listed on your high school transcript isn’t enough.
  6.  Attend summer orientation with at least one parent.  Try to schedule it for one of the earlier options.  Typically you’ll be registering for fall classes during your orientation. Waiting until later in the summer means some classes you want to take are already full and you have fewer options to choose from.

You’ve worked hard to get this far but college may be even harder.  Don’t be discouraged.  Focus on the end result and the new heights a college degree will take you to.

Cheryl Knudson is a school counselor for Irene-Wakonda Public Schools in South Dakota

The Five “Qs” of Public Service Loan Forgiveness

loan_forgiveness

#StudentLoanForgiveness. It’s a hashtag now, so you’ll all pay attention, right? Everyone wants their student loans forgiven. The perception is that very few qualify for any forgiveness programs. But did you know that there is one broad, employment-based forgiveness program for federal student loans? Most people don’t, or misunderstand how it works. Let me break down some key points of the Public Service Loan Forgiveness Program to help you figure out if you could qualify.

Can you check the all the boxes?

[ 1 ] Work in “Qualifying Employment”

First, you need to work in “qualifying” employment; that is, you must work in “public service.” But what does that mean? Everyone seems to have a different definition. Ours is based on who employs you, not what you do for your employer. The following types of employers qualify:

  • Governmental organizations – Federal, state, local, Tribal
  • Not-for-profit organization that is tax-exempt under Section 501(c)(3) of the Internal Revenue Code
  • A not-for-profit organization that provides some specific public services, such as public education, law enforcement, public health, or legal services

The following types of employers do not qualify:

  • Labor unions
  • Partisan political organizations
  • For-profit organizations

[ 2 ] “Qualifying Employment Status”

If you work at one of these types of organizations—great! That’s the most difficult criteria to meet. Next, you need to work there in a “qualifying” employment status, which means that you must be a full-time employee of the organization. Full time, for our purposes, generally means that you meet your employer’s definition of full time or work at least 30 hours per week, whichever is greater.

[ 3 ] Have a “Qualifying Loan”

A “qualifying” loan is a Direct Loan. It’s that simple. Of course, it’s the government, so nothing is actually that simple. You see, there are (or were) three big federal student loan programs:

  • The Direct Loan Program, which is now the biggest program,
  • The Federal Family Education Loan (FFEL) Program, which is what many students borrowed from until mid-2010, and
  • The Federal Perkins Loan Program, which is a relatively small program.

You may have loans from just one of these programs, or you may have borrowed from all three. If you’re not sure which loan program you borrowed from, I can’t blame you—I had 20 separate loans by the time that I finished graduate school! You can use the National Student Loan Data System to determine which program you borrowed from. Here’s a tip from me to you:  basically, if you see “Direct” in the loan type name, it’s a Direct Loan. Otherwise, it’s not.

Don’t have a Direct Loan? Don’t despair! You can consolidate your other federal student loans into a Direct Consolidation Loan and qualify that way. Not having a Direct Loan is the biggest reason that borrowers who are seeking Public Service Loan Forgiveness aren’t on the right track, so be sure that all of your loans that you want forgiven are Direct Loans before you proceed to the next step. If you do need to consolidate, be sure to check the box in the application that says that you’re consolidating for the purposes of loan forgiveness. It will make your life easier, I promise.

[ 4 ] Have a “Qualifying Repayment Plan”

Next, you need a “qualifying” repayment plan. All of the “income-driven repayment plans” are qualifying plans for Public Service Loan Forgiveness. So is the 10-year Standard Repayment Plan, but if you’re on that repayment plan, you should switch to an income-driven repayment plan straight away, or you will have a drastically lower loan balance left to be forgiven after you meet all of the criteria.

If you’re consolidating your loans, you can apply for an income-driven repayment plan in the consolidation application, but if you don’t, you will be placed on the Standard Repayment Plan for Direct Consolidation Loans, which is almost never a qualifying repayment plan for Public Service Loan Forgiveness. If you already have Direct Loans, you can submit an income-driven repayment plan application on StudentLoans.gov.

[ 5 ] Make 120 “Qualifying Payments”

Lastly, you need to make “qualifying” payments—120 of them. A qualifying payment is exactly what you would expect it to be. You get a bill. It has an “amount due” and it has a “due date”. Make the payment in that amount by the due date (or up to 15 days after), and the payment is a “qualifying payment”. If you make a payment when you’re not required to—say, because, you’re in a deferment or you paid your student loan early—then that doesn’t count. But if you reliably make your payment every month for 10 years, you should be okay. The best way to ensure that your payments qualify is to sign up for automatic payments with your loan servicer.

Note that these payments do not need to be consecutive. So, if you had made 10 qualifying payments, and then stop for a period of time (say, you go on a deferment), then start making qualifying payments again, you don’t start over; instead, you pick up where you left off.

And, I’m sorry to have to mention a seemingly arbitrary date, but a payment only qualifies if it was made after October 1, 2007, so nobody can qualify for Public Service Loan Forgiveness until 2017 at the earliest.

Ok, so do I qualify?

Now that you have the details, let me explain how all of the criteria work together. For any payment to count toward Public Service Loan Forgiveness, you need to meet all of the criteria when you make each payment. Stated differently, you need to be working for a qualifying employer on a full-time basis when you make a qualifying payment under a qualifying repayment plan on a Direct Loan. When you break these criteria down separately, it seems simpler. It’s when you try to pack it into one sentence that it seems overwhelming.

As much as I’d like to think that all of you now have a perfect understanding of this program and how it works, I know all of you are thinking—“okay, but do I qualify?” Here’s how you find out. Download this form. Fill it out. Have your employer certify it. Send it to FedLoan Servicing (one of our federal student loan servicers), queue up How I Met Your Mother on Netflix, and wait for an answer. FedLoan Servicing will do the following:

  • Check whether you have any qualifying loans.
  • If you have qualifying loans, validate that your employment qualifies. If none of your loans qualify, they’ll tell you so.
  • If your employment qualifies, they will send you a letter confirming that your employment qualifies. Then, any of your federally held loans that are not serviced by FedLoan Servicing will be transferred to them so that we can keep better track of your loans and payments for Public Service Loan Forgiveness. If your employment doesn’t qualify, they’ll tell you so.
  • After your loans are transferred, they will match up the dates of employment on the form that you submitted to the payments you made during that time and determine how many qualifying payments you made. You’ll receive a letter with a count of qualifying payments and an anticipated forgiveness date (which assumes that all your future payments also qualify).

It’s after you get this payment count back that you’ll know whether you’re on the right track. So, it really is a good idea to submit this form early and often. We recommend that you submit the form once per year or when you change jobs. The beauty of submitting these forms early and on an ongoing basis is that it means that you won’t have to submit 10 years’ worth of them when you ultimately want to apply for forgiveness. It also means that when you apply for forgiveness, that you’ll be able to do so with confidence that you qualify for it.

One more piece of good news: Public Service Loan Forgiveness is not considered income by the IRS. That means that it’s tax-free.

Ian Foss has worked as a program specialist for the Department of Education since 2010. He’s scheduled to be eligible for Public Service Loan Forgiveness on October 6, 2021, if all goes according to plan.

4 Things to Do Before Making Your First Student Loan Payment

4.28 4 Things to Do Before

One perk of having a federal student loan instead of a private student loan is that you are not required to start making payments right away. In fact, many federal student loans have a grace period*, or a set amount of time after you graduate, leave school, or drop below half-time enrollment before you must begin repaying your student loans. For most student loans, the grace period is 6 months but in some instances, the grace period could be longer. The grace period gives you time to get financially settled and to select your repayment plan.

For those of you who are getting ready to graduate, your grace period is about to begin. You’ll be contacted by your loan servicer, a company that works on behalf of the U.S. Department of Education to process and manage student loan payments, letting you know how the repayment process will work.

In the meantime, here are four things you should do now, before your first student loan payment is due:

1. Get Organized

Start by tracking down all of your student loans. Did you know that there is a website that allows you to view all your federal student loans in one place?

You can log into www.nslds.ed.gov using your Federal Student Aid PIN to view your loan balances, information about your loan servicer(s), and more.

Note: Don’t forget to check your personal records to see if you have private student loans.

2. Contact Your Loan Servicer

Your loan servicer is the company that will be collecting payments on your federal student loan on behalf of the U.S. Department of Education. They are also there to provide support. Your loan servicer can help you choose a repayment plan, understand loan consolidation, and complete other tasks related to your federal student loan, so it’s important to maintain contact with your loan servicer. If your circumstances change at any time during your repayment period, your loan servicer will be able to help.

To find out who your loan servicer is, visit www.nslds.ed.gov. You may have more than one loan servicer, so it is important that you look at each loan individually.

3. Estimate Your Monthly Payments Under Different Repayment Plans

Federal Student Aid has a great Repayment Estimator tool that allows you to compare our different repayment plan options side by side. Once you log in, the repayment estimator pulls in information about your federal student loans, such as your loan balance and your interest rates, and allows you to estimate what your monthly payment would be under each of our different repayment plans. It also allows you to compare the total amount you will pay for your loan over time depending on the repayment option you choose. Try it!

4. Select the Repayment Plan That Works for You

One of the greatest benefits of federal student loans is the flexible repayment options. Take advantage of them! Although you may select or be assigned a repayment plan when you first begin repaying your student loan, you can change repayment plans at any time. There are options to tie your monthly payments to your income and even ways you can have your loans forgiven if you are a teacher or employed in certain public service jobs. Once you have determined which repayment plan is right for you, you must contact your loan servicer to officially change your repayment plan.

* Not all federal student loans have a grace period. Note that for many loans, interest will accrue during your grace period.

Nicole Callahan is a digital engagement analyst at the Department of Education’s office of Federal Student Aid.

4 Mistakes I Made With My Student Loans and How You Can Avoid Them

mistakes_image

It’s been tough for me to come to terms with, but, unfortunately for me, I am not in college anymore. In fact, this spring marks three years since I graduated from college and went into repayment on my student loans. I know, not the most exciting thing in the world, but important. So while I don’t claim to be a student loan expert, I have learned a lot of lessons along the way, mostly through trial and error. In hopes that you won’t make the same mistakes I did, here are some things I wish I had known when I was graduating and getting ready to start repaying my student loans:

  1. I should have kept track of what I was borrowing

Let’s be real. When you take out student loans to help pay for college, it’s easy to forget that the money will eventually have to be paid back … with interest. The money just doesn’t seem real when you’re in college, and I didn’t do a good job of keeping track of what I was borrowing and how it was building up. When it was time to start repaying my loans, I was quite overwhelmed. I had different types of loans and different interest rates. When I did eventually see my loan balance, I was pretty shocked.

You can avoid this problem. Had I known there was a super easy way to keep track of how much I’d borrowed in federal student loans, I would have been much better off. Just go to www.nslds.ed.gov, select “Financial Aid Review,” log in, and you can view all of your federal student loans in one place! How did I miss that?

  1. I should have made interest payments while I was still in school

If you’re anything like me, you probably consumed your fair share of instant noodles while trying to survive on a college student’s budget. Trust me, I get it. But one thing I really regret when it comes to my student loans was not paying interest while I was in school or during my grace period. Like I said, I was far from rich, but when I was in college, I did have a work-study job and waited tables on the side. I probably could have spared a few dollars each month to pay down some student loan interest. Remember, student loans are borrowed money that you have to repay with interest and more importantly, that interest may capitalize, or be added to your total balance. My advice: Even though you don’t have to, do yourself a favor and consider paying at least some of your student loan interest while you’re in school. It will save you money in the long run.

  1. I should have kept my loan servicer in the loop

If you’re getting ready to graduate or have graduated recently and haven’t heard from your loan servicer, make sure you check that your loan servicer has up-to-date contact info for you. When I graduated and moved into my first big-girl apartment, I forgot to change my address with my loan servicer. I found out that all of my student loan correspondence was going to my mom’s address. I hadn’t even thought to update my loan servicer with my new contact information. Don’t make the same mistake I did. Keep your servicer informed of address, email, and phone changes.

  1. I should have figured out what my monthly loan payments were going to be BEFORE I went into repayment

By the time my grace period was over, I had a decent idea of how much I had borrowed in total, but I had no idea what my monthly payments would be. I thought I was fine. I had started my new job and been paying rent and other bills for about six months. Then my grace period ended, and I got my first bill from my loan servicer. It was definitely an expense I hadn’t fully taken into account.

Don’t make the same mistake. Federal Student Aid has an awesome repayment estimator that allows you to pull in your federal student loan information and compare what your monthly payments would be under the different repayment plans that are offered. That way, you can choose the right repayment plan for you, know how much you can expect to pay monthly, and budget accordingly … unlike me.

I’ll be the first to admit that this whole process can be a little overwhelming, especially when you’re new at it. But just remember, your loan servicer is there to help you. If you have questions or need advice, don’t hesitate to contact them.

Nicole Callahan is a digital engagement strategist at the Department of Education’s office of Federal Student Aid.