Monday, June 29, 2009

Is the new student loan forgiveness program for me? Part 1

The news this morning about a revamped student loan forgiveness program piqued the interest of several of my coworkers this morning, as a lot of us have just the kind of high debt to income ratio it is designed to aid. After spending the last hour (!) trying to get some answers, however, I'm not sure it's right for me. [This is part 1 in a series of entries about this topics as it's just a little too much to digest all at once.]

After reading several articles on the subject, I was finally directed to ask my lender, good old Aunt Sallie. She told me that in order to be eligible for the forgiveness program, you have to be making income-contingent loan payments. I, however, am making level payments, which are defined as:
Extended Repayment - Level/Standard: This repayment plan, designed to allow you
to make lower monthly payments through a lengthened repayment period of up to 25 years, is available to borrowers with more than $30,000 in outstanding Federal
Stafford, PLUS and/or Consolidation loan balances and whose loans were first
disbursed 10/7/98 or later. Level/standard monthly payments of both principal
and interest are made throughout the repayment term. The repayment term
available on your private student loans may vary depending on loan type,
outstanding loan balance, repayment plan, and the terms of your promissory note.
Thus, in order to find out if I would be eligible for the forgiveness program I first needed to find out if I was eligible to make income-contingent payments instead. Here I entered some data in a calculator and here's what I got:



That chart would be completely accurate if I hadn't guessed my Adjusted Gross Income. No matter, it seems I am in fact eligible for income-based repayment of my federal student loans...at least for the next year when I'm single.

Up next...do I want to switch to the income-based repayment plan and how does this forgiveness program really work?



7 comments:

Money Dieter said...

Thanks!

Angie said...

If you don't have difficulty making the payments you do now AND you plan on having the student loans paid off in 25 years then this program should not affect you. If you don't have difficulty making the payments then an income based repayment will only increase the total amount you end up paying over time.

Sallie's Niece said...

Angie, both those statements are true. As a public employee, however, I am eligible to have the balance of my loans forgiven after ten years. The more I think about it the less I think the program is for me though. I will post a followup soon.

Shtinkykat said...

I didn't qualify. :-( But Angie makes an excellent point. I'm gonna stick to my guns and pay it off before 2014.

Anonymous said...

I have not paid a dime on a 30 year old student loan and don't intend to either.

Chazzi44 said...

I borrowed $2500 in 1986 and went into default and now I have paid back over $9000 for that loan and it still is not paid off/??? This has got to be criminal. Somebody please help me. I think I am being robbed. This is worse than the IRS. They garnish your wages and the payments don't stop. The loan was only two thousand five hundred dollars. My God.

Anonymous said...

IT'S OVER 9000!!!