Drowning in Debt? - Equal Justice Works · • Only certain borrowers & certain loans ̶No federal...

Drowning in Debt?

How Public Interest Lawyers Can Earn Student Loan Forgiveness

equaljusticeworks.org/ed-debt @EJW_org #studentdebthelp

Today’s Agenda

• Know Your Federal Loans

• Essentials of Public Service Loan Forgiveness

• Essentials of Loan Repayment Assistance Programs

• Resources for managing high student debt


Know Your Loans


Loan Basics: Sources of Student Loans

• State Loans – States may have different repayment options

• Federal Loans

– May be eligible for federal relief programs

• Private Loans – Never eligible – The government cannot forgive

or write off debt that it does not own


Federal Loans

Grad PLUS

Unsubsidized Stafford

Federal Consolidation

Subsidized Stafford

Federal Loans


Loan Basics: Sources of Federal Loans

Federal Family Education Loan (FFEL): Government-guaranteed loans but funds came from banks and other financial institutions. FFEL ended in 2010.

Federal Direct: Funds for the loans come directly from the US Department of Education.


Loan Basics: What loans do I have?

• Federal Student Loans – National Student Loan Data System:

www.nslds.ed.gov – Contact your servicer and ask

• Private Student Loans

– Look for private loans at: https://www.annualcreditreport.com

http://www.nslds.ed.gov/

https://www.annualcreditreport.com/


• www.nslds.ed.gov

Loan Basics: What loans do I have?

http://www.nslds.ed.gov/


College Cost Reduction and Access Act of 2007 (CCRAA)

Income-Based Repayment Public Service

Loan Forgiveness


Public Service Loan Forgiveness

• If You: – Make 120 qualifying loan payments while

working full-time in a qualifying public service position after October 1, 2007

• The Federal Government will: – Forgive the balance remaining on your eligible

Federal Direct Loans.


PSLF: Requirements for Forgiveness

• Eligible Loans • Qualifying

Employment

• Qualifying Payments

Forgiveness

Qualifying Payments

Qualifying Employment Eligible

Loans


PSLF: Which loans are eligible?

Only Federal Direct FFEL Loans are Not

Eligible


PSLF: Qualifying Employment

Government 501(c)(3) Non-profit

AmeriCorps Position Peace Corps

Public Service Organization


PSLF: Full-time Employment

• Working in qualifying employment for: – An annual average of at least 30 hours per week; or

– For a contractual or employment period of at least 8

months, an average of 30 hours per week; or

– Unless the qualifying employment is with two or more employers, the number of hours the employer considers full-time.

• Can combine/change positions

Must be paid by the qualifying employer(s)


PSLF: Qualifying Payments

• 120 times – separate, monthly and on time in a Qualifying Repayment Plan

– 10-Year “Standard” Repayment Plan

– Plan under which your payments are at least as

much as they’d be under 10-Year Repayment

– Income-Contingent Repayment

– Income-Based Repayment

• Payments do not need to be consecutive


• What payments don’t count toward the 120 payments required for PSLF? – Late payments (more than 15 days)

– Payments made on the “wrong” kind of loans

– Payments made while in the “wrong” kind of job

– Payments made in the “wrong” repayment plan

PSLF: Nonqualifying Payments


PSLF: Using Income-Based Repayment

• A repayment plan for federal loans Reduces monthly payments for borrowers with a

“partial financial hardship”

• High debt relative to income – The 15% Rule – Amount you owe annually is more than 15% of

your discretionary income – Payment cap is 15% of discretionary income


Pay As You Earn: New ICR-A • “Pay As You Earn” Proposal

• The 10% rule A $353 payment on a $45,000 salary becomes $235

• Forgiveness after 20 years

• Only certain borrowers & certain loans No federal loans before October 1, 2007 and will Borrow a federal loan after October 1, 2011 Only Federal Direct Loans

• What about you? When did you borrow your first federal loan?


IBR: Information at studentaid.ed.gov

http://studentaid.ed.gov/PORTALSWebApp/students/english/IBRPlan.jsp


PSLF: Compare Monthly Payments • Use the calculators at www.finaid.org:

http://www.finaid.org/


IBR & PSLF: Dara Defender finds relief! • Dara has $120,000 in federal

loans – $100,000 unsubsidized Federal

Direct

– $20,000 subsidized FFEL

• Dara takes a public defender position – Her salary starts at $45,000

– But she knows about IBR &

PSLF


IBR & PSLF: Dara Defender finds relief! • Dara consolidates into Federal

Direct – She now has $120,000 in a

Federal Direct Consolidation loan at 6.8% interest

• Dara enrolls in IBR – In her first year, her payments

are $353

– They would be $1,381 under standard 10-year repayment


IBR & PSLF: Dara Defender finds relief! • Dara remains in public service

– She receives annual raises of 3%

– Her payments gradually rise

– In year 10, her monthly payments are $461

• Dara applies for PSLF – She has paid $48,570 over 10

years

– The federal government forgives $151,133!


Dara is eligible for the 10% cap! • Under the new Pay As You Earn

– Her initial payments are now $235

– In year 10, her monthly payments are $307

• Dara applies for PSLF – She has paid $32,380 over 10

years

– The federal government forgives $166,595!


PSLF: Using income-driven plans

• Apply for IBR or ICR – As soon as you think you may be eligible – Select the plan when you begin repayment – Contact your loan servicer(s) and request to

switch into the plan

• Apply for PSLF – After making 120 qualifying payments – Track your employment!


PSLF: Use Income-Driven Repayment


Using Income-Driven Repayment


PSLF: Track Your Progress


What if I don’t qualify for PSLF?

• Benefits of IBR and ICR even without Public Service Loan Forgiveness:

− Lower monthly payment

− No required type of employment

− Forgiveness after 25 years

− Pay as You Earn has 20 year forgiveness


Using IBR & PSLF: Considerations

• Not a one-size fits all solution

• Points of consideration: – Tax implications

– Likely future income

– Career plans

• Consult a tax or financial specialist


Revisit Federal Loans Which Loans Are Eligible?


Which loans are eligible?

Consolidate FFEL into Federal Direct • Stafford and Grad Plus • Reconsolidate a FFEL Consolidation Loan http://loanconsolidation.ed.gov • Consider keeping Parent PLUS & Perkins separate

FFEL

IBR

Federal Direct

IBR ICR Pay As You Earn PSLF

Never Eligible Commercial/ Private loans

Loans in Default


PSLF: Consolidating into Federal Direct


www.studentloanborrowerassistance.org

http://www.studentloanborrowerassistance.org/


Loan Repayment Assistance Programs


LRAPs: Where can I find one?

State-Based LRAPs Visit www.equaljusticeworks.org

for more information

School LRAPs Ask your school! Visit

www.equaljusticeworks.org

Employer LRAPs Ask your employer!

Federal LRAPs Federal programs based on

profession

Not necessarily mutually exclusive with IBR and PSLF, but check with program administrator to make sure


LRAPs: Design Matters

• Not all LRAPs are created equally:

– Different requirements and restrictions

– Varying payment amounts

– Varying duration of eligibility

– May or may not be allowed to combine

– May or may not be taxable


Educational Debt Relief: Tax Issues

• NOT TAXABLE: – Public Service Loan Forgiveness – Many school LRAPs

• TAXABLE:

– 25- and 20-year IBR/ICR Forgiveness – Employer LRAPs – Some government LRAPs


Educational Debt & Public Interest? • Remember the Steps

Know your loans

Know your career plans

Know options for managing high student debt • Public Service Loan Forgiveness • Income-Driven Repayment • Loan Repayment Assistance Programs

Think about your plans, then take the right steps to get there!


Information, Resources & Checklists • www.equaljusticeworks.org

http://www.equaljusticeworks.org/


Get our new eBook: Take Control of Your Future

Now Available in the Kindle Store!


Additional Resources

• Resources: www.equaljusticeworks.org http://studentaid.ed.gov www.finaid.org www.studentloanborrowerassistance.org









• Questions? – Get our new ebook and post on our forum:

www.equaljusticeworks.org – Email: [email protected]

• Stay connected for news, webinars and tips! @EJW_org #StudentDebtHelp

Equal Justice Works www.facebook.com/EqualJusticeWorks

Stay Connected!


mailto:[email protected]

http://www.facebook.com/EqualJusticeWorks

Presented by: Isaac Bowers [email protected]

Radhika Singh Miller [email protected]

equaljusticeworks.org/ed-debt

@EJW_org #studentdebthelp



Date post:	12-Sep-2020
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Drowning in Debt? - Equal Justice Works · • Only certain borrowers & certain loans ̶No federal...

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