Three types of Student Loan Forgiveness plan
If you’re a student carrying the burden of a student loan, you probably think that you qualify for student loan forgiveness. We’re here to break it down for you. Here are some student loan repayment plans that qualify for student loan forgiveness.
Public Service Loan Forgiveness (PSLF)
This is the most popular program among students to get student loan forgiveness. Students can get maximum benefits by combining Income Based Repayment Plan (IBR) or Pay As You Earn Repayment Plan (PAYE) with Public Service Loan Forgiveness (PSLF). All you have to do is work in public service for ten years. You can qualify for employment with a federal, state, local government agency, entity, or organization or a not-for-profit organization that has been designated as tax-exempt by the Internal Revenue Service (IRS) under Section 501(c)(3) of the Internal Revenue Code (IRC). You can choose from the various types or nature of employment with the organization.
Income Based Repayment Plan (IBR)
The IBR plan is a standard repayment plan borrowers switch to during financial hardship. On this plan, your loans will be forgiven once you make payments for 25 years. Also, note that your loan repayment won’t exceed the payment of the 10-year standard repayment plan. Your loan will be forgiven at the end of the term. You can determine the actual amount of your income by using a formula based on the size of your family and tax returns. There are various websites that can help you calculate the same.
Pay As You Earn Repayment Plan (PAYE)
This one’s almost as same as the IBR plan. The PAYE plan is also referred to as Obama Student Loan Forgiveness. You will have to pay maximum 10% of your discretionary income. 20 years is all it takes for your loan to be forgiven. Not to worry, your loan repayment with PAYE will not exceed the payment of the ten-year standard repayment plan while your loan will be forgiven at the end of the term.
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