Possible Repayment Options for Federal Loans

Our goal is to assist you in paying off your student loans as quickly and cheaply as possible. The following 3 options and their descriptions will provide you with a basis for understanding the chart that follows. The information contained in the chart clearly shows a financial advantage to selecting the Income Based Repayment plan and paying an additional amount each month over and above your scheduled monthly payments. The Public Service Loan Forgiveness program provides an additional advantage, as explained below.

You must complete the three Online Exit Counseling modules before graduation. They are available at:

We will also conduct three In-Person Exit Counseling sessions and you must attend at least one of these. The first session will be on Friday, March 15th at 6:00pm in Classroom 2. The second session will be in April on a date to be determined. And the third session will be on Tuesday, May 28th at 5:30pm in Classroom 1. These sessions will be mostly open conversation times for you to ask questions. We highly recommend that you complete the online modules before attending an In-Person Exit Counseling session.

Standard Repayment Plan:

With the standard plan, you will pay a fixed amount each month until your loans are paid in full. The monthly payment amount is based on your loan balance amortized over a period of 10 years and will likely be higher than it would be under the Income-Based Repayment plan.

Income-Based Repayment (IBR) Plan:

With this plan, the required monthly payment is capped at an amount that is intended to be affordable, based on your income and family size. The repayment time span can be extended to as much as 25 years, if needed. You are eligible for IBR if the monthly repayment amount under IBR will be less than the monthly amount calculated under a 10-year standard repayment plan.

IBR Monthly Payment Calculation:

Monthly payment = 15% of (monthly adjusted gross income - 150% of monthly poverty level based on family size)

If you repay under the IBR plan for 25 years and meet other requirements, you may have the remaining loan balance cancelled. Please note though that this is unlikely for medical practitioners and that the canceled amount would be considered income by the Internal Revenue Service. If you pay an additional amount each month over and above your scheduled IBR payment, your loan balance will be paid off much quicker and you will save a sizable amount of interest. Additionally, if you work in public service, your loan balance could be forgiven in as little as 10 years with the Public Service Loan Forgiveness program described below.

To determine whether or not you might qualify for IBR, go to the Department of Education’s IBR calculator at:
http://studentaid.ed.gov/repay-loans/understand/plans/income-based/calculator. For an official determination of your eligibility for IBR or to apply for IBR, you must contact the servicer(s) of your loan(s). You can view the servicer information for each of your loans through the Department of Education’s National Student Loan Data System (NSLDS) web site at www.nslds.ed.gov.

Public Service Loan Forgiveness Program:

This program was created to encourage employment in the public service sector and is by far the most financially savvy option. An added incentive is that the total amount of loan forgiveness will not be considered taxable income by the Internal Revenue Service. If the following conditions are met, a sizable portion of your federal loans can be forgiven:

You must make 120 payments (approximately 10 years if paid monthly) to qualify. These payments can be based on the Income Based Repayment Plan (IBR), which will result in a much lower monthly payment obligation. The 120 payments do not have to be consecutive, so if for a time period you use a forbearance or deferment and then return to IBR, all of your previous payments will still count toward the total of 120.
The payments must be made through Direct Loans (Department of Education) so you must consolidate to Direct Loans in the very beginning before you apply for IBR.
While in repayment you must be employed with a qualifying employer, which would include a state or federal agency, a military branch, or any 501(c)(3) organization (see IRS publication 78 or their website at http://www.irs.gov/Charities-&-Non-Profits/Search-for-Charities for a listing).
You must be employed with that qualifying employer while making the 120 payments and when applying for the forgiveness.

If you decide on the Public Service Loan Forgiveness program, the following steps should be taken:

Consolidate your federal loans into a Direct Consolidation loan through the Department of Education’s website at https://loanconsolidation.ed.gov/AppEntry/apply-online/appindex.jsp.
Apply for the IBR plan, which will carry an obligation for only minimum monthly payments; even if your calculated monthly payment is zero, it will still count toward the 120 payments necessary for loan balance forgiveness. If you are financially unable to meet the minimum monthly payments of the IBR plan, you have the option of putting your Direct Consolidation loan into a Residency Forbearance status. In that status, you will not be required to make payments, though interest will continue to accrue and no progress will be made toward the 120 payments necessary for loan balance forgiveness. Since the monthly payments under the IBR plan will be very low while in residency, repayment is recommended instead of Residency Forbearance.
Toward the end of each year, you must renew your IBR status through the servicer of your loan. Based on your updated adjusted gross income verification, your monthly payment will be recalculated and may change.
Also at the end of each year, contact your servicer and request an Employment Certification Form to make sure the payments you have made are accounted for.
Keep your Direct Consolidation loan in the IBR plan until you have reached the 120 payment goal and continue working for a state or federal agency, a military branch , or any 501(c)(3) organization.
When you have reached the 120 payment goal you can then apply for the forgiveness of the loan balance. Continue working at the qualifying agency until your application is approved and your balance is forgiven.

If you decide against the Public Service Loan Forgiveness program, the following steps should be taken to minimize your interest cost during repayment:

Do not consolidate your loans. In consolidation, all of your loans are converted into one loan, the Consolidation loan, and the original loans cease to exist. The interest rate on the Consolidation loan is determined using a weighted average of the interest rates of the original loans. This prevents you from individually paying off your higher rate loans first.
Apply for the IBR plan, which will carry an obligation for only minimum monthly payments, possibly as low as zero. It is advisable to complete the IBR application process as soon as possible since it will be easier to qualify when your income is at its lowest. Once you are approved for IBR, you remain approved no matter how high your income becomes. As your income increases, your monthly payments may increase but your approval for IBR remains.
Make voluntary payments to lower the principal balance of your highest rate loan. This is critical for saving money on interest charges. If you are financially unable to meet the minimum monthly payments of the IBR plan, you do have the option of putting your loans into a Residency Forbearance status. Keep in mind that interest still accumulates during a Residency Forbearance, so making payments of any amount you can is highly encouraged.
When your income increases after the completion of your residency, the monthly IBR payment most likely will also increase. At this point, it is advisable to compare the IBR plan with other government plans offered at that time. Regardless of the plan however, it is strongly advised that you continue to make voluntary payments against your highest rate loan, over and above what your payment obligation is; this practice will ensure you’re paying off your student loans in the least amount of time using the least amount of money.

Comparison Chart:

Public Service Loan Forgiveness Program:

After 120 payments (10 yrs. if paid monthly) your loan balance is forgiven
Must use the IBR plan
Calculated IBR monthly payments of $0 also count toward the 120 payments
The 120 payments do not have to be consecutive
The forgiven amount is non-taxable as income
Must convert your loans into one Direct Consolidation loan
Must verify your income each year and renew your payment status
Must be employed with a qualifying organization
The most financially savvy way to pay off your student loans

Income-Based Repayment Plan:

Monthly payment amounts are based on your income and family size
No restrictions on place of employment
After 25 years of payments your loan balance is forgiven
The forgiven amount will be considered taxable income
Loan consolidation is not required and not recommended if you are not going for Public Service Loan Forgiveness
Must verify your income each year and renew your payment status
Paying a voluntary additional amount each month is highly encouraged

Standard Repayment Plan:

Monthly payment amounts do not consider your income or family size
Loan balances are amortized over 10 years with equal monthly payments
No opportunity to have any amount forgiven
Loan consolidation is not required nor recommended
Yearly renewal is not required
The aggregate dollar amount paid back in 10 years will exceed the amount repaid in the IBR plan with voluntary additional payments or the Public Service Loan Repayment program, but will be less than other repayment plans

Class of 2012

Commencement

Travel Resources

The Alma Mater