In 2007, congress passed what is know as income based student loan repayment. This method simply allows a borrower to limit their payments at 15% of their income above the poverty standard. The poverty standard is defined as 150% the standard poverty level for a borrower's family. According to the Federal Government, the poverty standard is set at $16,250 for a single person with no children.
After twenty five years if there is any balance left unpaid, then the debt is forgiven. However, this unpaid balance is considered as taxable income according to the Internal Revenue Service. What's interesting is that the loan is forgiven after different times depending on what sector you enter into the work force.
If you enter the private sector work force then the debt will be forgiven after twenty five years. However, this is different if you enter the public sector. If you enter the public sector work force, then your debts will be forgiven after only ten years and any unpaid balances will not be considered taxable income by the IRS.
Is There Any Limitations On Type Of Loans Offered?
Yes. The income based student loan repayment is not offered for private student loans. This type of repayment is only offered on the Federal Stafford, Grad Plus and the Perkins Loans.
Are There Salary Requirements?
No. Currently, there are no salary requirements to qualify for the income based repayment benefit.
In order to know if you qualify for this repayment offer, you will need to contact your lender and ask them about the alternative payment plans. If you do not qualify for income based repayment then you can always consolidate your student loans with the Department of Education's loan program.
Will This Loan Forgiveness Be Offered On Loans That Are Already Older Than 20 Years?
Yes and No. The problem with this is that those that have student loans and have been paying for a lengthy period of time will have to apply for the program in order to take advantage of the benefits. So if you have already been paying your loan off for fifteen years and you just now find out about the program, then you will have to apply for the program and then wait either ten years for public sector or twenty years if you went into the private sector. So you may not be able to have enough time left on your loan to take advantage of the benefits that this can offer you.
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