Public Service Loan Forgiveness Flashcards
1
Q
What are the qualification requirements for the PSLF?
A
- Must work full-time for a non-profit organization
- Must have direct loans (or must consolidate loans into direct loans) which are to be serviced by FedLoan Services
- Must be repaying your loans on an income-driven plan
- Must make 120 qualifying loan payments (10-years)
- Must submit employment certification form annually or when employer changes to ensure the individual remains on the right track towards forgiveness.
2
Q
Are you required to submit an employment certification form annually?
A
- Technically no, however, it makes the record keeping easier.
- More importantly, after every submission of an employment certification form you will receive an updated letter specifying how many qualified payments you have made and how many more you are obligated to make before you can apply for the PSLF program.
- It’s similar to preventive maintence on a vehicle or an annual health check. Ideally, you want to know if an issue is creeping its ugly head sooner so that it doesn’t evolve into a complicated problem down the road.
3
Q
Which loans are qualifiable for loan forgiveness?
A
- Any non-defaulted loan received under the William D. Ford Federal Direct Loan Program
- Although the Federal Family Education Loan (FFEL) and Federal Perkins loans do not qualify, they can be consolidated into a direct loan to become eligible. Having said that, any payments made to the loans prior to the consolidation do not count towards the 120 payments required for PSLF.
- Only federal student loans can be repaid under the income-driven plans.
- Private student loans are not eligible.
4
Q
What is a qualifying payment?
A
- A payment that must be made under a qualifying repayment plan
- You can not make qualifying payments when in school, grace period, deferment, or forbearance periods
- Your 120 payments do not need to be consecutive
- Do not make higher payments than you are required to because you only get credit for one payment a month. In other words, you can’t qualify for loan forgiveness faster by contributing additional payments
- After submitting your Employment Certification form, you will receive a letter from FedLoan Servicing stating how many qualified payments you have made. Alternatively, you can log into FedLoan Servicing to view your loan details.
5
Q
What is the idea behind a qualified income-driven plan?
A
- The idea is to keep your income low enough to continue to qualify for income driven loan forgiveness.
- One of the most optimal ways to qualify for the maximum loan forgiveness is to redirect all or part of your current loan repayment amount to a retirement savings such as a 403(b) plan.
- Income driven plans are determined by the amount of discretionary income or Adjusted Gross Income
6
Q
Describe the REPAYE plan
A
- Revised Pay as You Earn Repayment Plan
- Generally 10% of discretionary income
- You will be in the REPAYE Plan for 20 years if loans are for undergraduate degree
- . You will be in the REPAYE plan for 25 years if the loans were for graduate and professional degree
7
Q
Describe the PAYE plan
A
- Pay As You Earn Plan (PAYE Plan)
- Generally 10% of discretionary income but no more than the 10-year standard repayment plan amount
- You will be in the PAYE plan for 20 years
8
Q
Describe the IBR plan
A
- Income-Based Repayment Plan (IBR Plan)
- . Generally 10% of discretionary income if you’re a new borrow (after July 1, 2014) but never more than 10-year standard repayment plan amount
- . Generally 15% of discretionary income if you’re not new borrow (after July 1, 2014) but never more than 10-year standard repayment plan amount
9
Q
Describe the ICR plan
A
- Income-Contingent Repayment Plan (ICR Plan)
- The lesser of the following:
- 20% of your discretionary income or
- what you would pay on a repayment plan with a fixed payment over the course of 12 years, adjusted according to your income.
10
Q
What is the difference between discretionary and disposable income?
A
- Disposable income is the net income a household or individual has available to invest, save or spend after income taxes.
- Disposable income does not take into account necessities.
- Necessities a household may have rent, clothing, food, bill payments, goods and services, and other typical expenses.
- . Discretionary income is the amount a household or individual has to save, invest, or spend after taxes, and necessities are paid.
11
Q
What is considered full-time employment?
A
For PSLF, you are generally considered to work full-time if you meet your employer’s definition of full-time or work at least 30 hours per week, whichever is greater.
12
Q
Define “grace period”
A
- For certain types of federal student loans, a period of time after you graduate, leave school, or drop below half-time enrollment when you are not required to make payments.
- . You are responsible for paying the interest that accrues on unsubsidized loans during the grace period.
- If the interest is unpaid, it will be added to the principal balance of the loan (capitalized) when the repayment period begins.
13
Q
Define “deferment”
A
- A temporary postponement of payment on a loan that is allowed under certain conditions and during which interest generally does not accrue on Direct Subsidized Loans, the subsidized portion of Direct Consolidation Loans, Subsidized Federal Stafford Loans, the subsidized portion of FFEL Consolidation Loans, and Federal Perkins Loans.
- . All other federal student loans that are deferred will continue to accrue interest.
- . Any unpaid interest that accrued during the deferment period may be added to the principal balance (capitalized) of the loan(s).
14
Q
Define “forebearance”
A
- . A period during which your monthly loan payments are temporarily suspended or reduced.
- . Your lender may grant you a forbearance if you are willing but unable to make loan payments due to certain types of financial hardships.
- . During forbearance, principal payments are postponed but interest continues to accrue.
- . Unpaid interest that accrues during the forbearance will be added to the principal balance (capitalized) of your loan(s), increasing the total amount you owe.
15
Q
Will you receive PSLF automatically?
A
- . No. After you make your 120th qualifying monthly payment, you will need to submit the PSLF application to receive loan forgiveness.
- . You must be working for a qualifying employer at the time you submit the application for forgiveness and at the time the remaining balance on your loan is forgiven.
