Federal Student Loan
Forgiveness and Cancellation
Benefits for
Ian Foss and Brian Smith
Benefits for
School Librarians
U.S. Department of Education
March 6, 2014
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Federal Perkins Loan
Federal Perkins Loan
Program
Librarian Cancellation
To qualify for a librarian cancellation a Perkins borrower must be employed full-time as a librarian by:
An elementary or secondary school that is eligible for assistance under Title I, Part A of the
Elementary and Secondary Education Act (ESEA); or
or
A public library that serves a geographic area that contains one or more schools eligible for
assistance under Title I, Part A
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Librarian Cancellation
The borrower must be a librarian with a master’s degree
Librarian Cancellation
A portion of a borrower’s Perkins Loan is cancelled for each year (12 consecutive months) of eligible employment at these rates:
15% of principal each year for the 1stand 2ndyears of
eligible service
20% of principal each year for the 3rdand 4thyears of
eligible service
30% of principal for the 5th year of eligible service
Interest is cancelled for each year of eligible service
The year of eligible service must include August 14, 2008, or begin on or after that date 5
Librarian Cancellation
To apply for a librarian cancellation, the borrower contacts the school that awarded the Perkins Loan, or the servicer acting on behalf of the school
The borrower must submit to the school or servicer a written request for the cancellation, and any
required supporting documentation
Borrowers qualify for deferment during the year of
Borrowers qualify for deferment during the year of eligible service
Perkins Teacher Cancellation
For purposes of a Perkins teacher cancellation only, the definition of “teacher” includes individuals who provide educational services to students
“Educational services” are services directly related to classroom teaching, and include services provided by school librarians or school guidance counselors
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Perkins Teacher Cancellation
A Perkins borrower who meets the definition of “teacher” may qualify for a teacher cancellation if the borrower is employed full-time by a public or private non-profit elementary or secondary school
and-- The school is included on the Teacher Cancellation Low-Income Directory;
The borrower is teaching in a teacher shortage area; or
The borrower is teaching in a teacher shortage area; or
A school is included on the Teacher Cancellation
Low-Perkins Teacher Cancellation
A school is included on the Teacher Cancellation Low Income Directory if—
1
• It is in a school district that qualifies for funds under Title I, Part A
2
• Over 30% of its enrollment are Title I children, as determined by the State education agency
9 2 as determined by the State education agency
3
• The State education agency has submitted the school for inclusion on the Directory
Perkins Teacher Cancellation
The Teacher Cancellation Low-Income Directory is available at this link:
Perkins Teacher Cancellation
A portion of a borrower’s Perkins Loan is cancelled for each academic year of eligible employment at these rates:
15% of principal each year for the 1stand 2ndyears
of eligible service
20% of principal each year for the 3rdand 4thyears
of eligible service of eligible service
30% of principal for the 5th year of eligible service
Interest is cancelled for each year of eligible service
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Perkins Teacher Cancellation
To apply for a Perkins teacher cancellation, the borrower contacts the school that awarded the Perkins Loan, or the servicer acting on behalf of the school
The borrower must submit to the school or servicer a written request for the cancellation, and any required supporting documentation
Borrowers qualify for deferment during the year of
Borrowers qualify for deferment during the year of eligible teaching service
William D. Ford Federal Direct Loan
Program
Program
and
Federal Family Education Loan
(FFEL) Program
Forgiveness Benefits
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Teacher Loan Forgiveness
To receive Teacher Loan Forgiveness, a borrower must be a teacher.
For Teacher Loan Forgiveness, a teacher is a person who provides direct classroom teaching or classroom-type teaching in a non-classroom setting, including special education teachers.
Public Service Loan Forgiveness
(PSLF)
120 qualifying payments On Direct Loans
On qualifying repayment plans
Whil ki t lif i l
Borrower must also be employed by a qualifying organization at the time that the borrower applies for and receives PSLF
According to the IRS, the forgiven amount is not treated as taxable income
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While working at qualifying employer
PSLF: Qualifying Payments
1 • Must make 120 separate, monthly payments 2 • After October 1, 2007
3 • Do not need to be consecutive
• Must be for full amount due under plan
PSLF: Qualifying Payments
Multiple, partial payments during the borrower’s monthly billing cycle will qualify if they add up to the borrower’s monthly payment amount
A borrower will not receive credit for more than one payment toward PSLF if the borrower makes a lump sum payment (e.g., makes a single payment equal to two or more full monthly payments)
Exception for AmeriCorps and Peace Corps borrowers who make lump sum payments using education award or transition payment
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PSLF: Qualifying Repayment Plan
10-Year Standard IBR
ICR
Pay As You Earn
IDR: Eligible Borrowers
Eligible DL ICR *IBR < 10-year Std. Eligible DL/FFEL IBR * = partial financial hardship 19 Disb. on/after Oct. 2011 New borr. on/after Oct. 2007 *PAYE < 10-year Std. Eligible DL PAYE
IDR: Eligible Loans
•Direct Loans ICR •Direct Loans •Loans received as student •Consolidated parent loans IBR
•Direct & FFEL Loans
•Loans received as student
student
IDR: Payment Amounts
Under ICR, borrowers pay 12-Year Standard * Percentage based on income (payments based on income) 20% of Discretionary Income (payments based on income) the lesser of:
Under IBR, borrowers pay the lesser of: 15% of
Discretionary 10-Year Standard ( i U d P A Y E 21 y Income (income-based payments) (non-income-based payments) Under Pay As You Earn,
borrowers pay the lesser of: 10% of Discretionary Income (income-based payments) 10-Year Standard (non-income-based payments)
IDR: Loan Forgiveness
IRS: “it’s taxable”
IBR: 25
years Qualifying repayment includes:
• Payments under an income-driven plan
• Payments under the 10-year standard repayment plan (or any other repayment plan with a payment amount at least
l t th 10 t d d ICR: 25 years PAYE: 20 years
equal to the 10-year standard plan amount) or
Billy Borrower
Billy Borrower:
Is single with no dependents and lives in DC
Has an AGI of $35,000 that rises at 5% per year and
Has $50,000 in Direct Loan debt ($23,000 of which is subsidized), all of which has a 3.86% interest rate
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Repayment Estimator
Repa ment Repa ment Initial Final Total Total Paid Repayment
Plan Repayment Period Initial Payment Final Payment Total Interest Total Paid
Standard 10 years $504 $504 $10,462 $60,462
Graduated 10 years $282 $845 $13,049 $63,049
Extended 25 years $261 $261 $28,350 $78,350
Ext-Grad 25 years $163 $473 $35,672 $85,672
IBR 16 yrs, 2 mos $222 $504 $20,779 $70,779
PAYE 20 years $148 $471 $31,788 $67,980
IDR: Billy Borrower
$600
$300 $400 $500
Pay As You Earn IBR ICR 25 $0 $100 $200
PSLF: Eligible Loans
PSLF i l f Di t L b t ll Di t L
PSLF: Qualifying Employment
Doesn’t matter
1
• Any government organization2
• 501(c)(3) not-for-profit organization what the borrower’s job duties are. Borrower can work at multiple 273
• Other not-for-profit organizations providing specific qualifying services organizations while making the required120 payments.
PSLF: Full-Time Employment
Must be a full-time employee or work multiple part-time jobs that equal full part-time
Full-time is whatever the employer considers full-time, but must be at least an annual average of 30 hours per week
For borrowers working for a not-for-profit
organization (501(c)(3) or otherwise) with job duties organization (501(c)(3) or otherwise) with job duties that include religious instruction, worship services, or proselytizing, the hours spent on those activities cannot be factored into meeting the full-time
PSLF: Employment Certification
O J 31 2012 l d l t E l t
On January 31, 2012, released a voluntary Employment Certification Form that borrowers can submit to the FedLoan Servicing (FLS) for a determination of whether their employment and payments qualify for PSLF
FLS determines FLS determines
For more, including Q&As, see
StudentAid.gov/PublicService 29 Borrower submits form to FLS FLS determines whether employment qualifies FLS has loans transferred to FLS FLS determines whether qualifying payments Borrower submits another form FLS determines new qualifying payments
PSLF: Employment Certification
Employment Certification Form is not an application for forgiveness
Borrower must make 120 qualifying payments after October 1, 2007, so no borrowers can qualify until 2017 at the earliest
Form: Common Problems
Common Problems FFEL-only borrowers Missing EIN 31 Problems Wrong repayment plan For-profit corporations Certification in wrong category of employer
Income-Driven vs. PSLF
I D i
Income-Driven vs. PSLF
Plan Initial Payment Final PaymentTotal Paid Forgiven (IDR) Total Paid (at 10 yrs) Forgiven (PSLF) Standard $504 $504 $60,462 N/A $60,462 $0
Graduated $282 $845 $63,049 N/A $63,049 N/A
Extended $261 $261 $78,350 N/A $31,320 N/A
Ext-Grad $163 $473 $85 672 N/A $23 288 N/A
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Ext Grad $163 $473 $85,672 N/A $23,288 N/A
IBR $222 $504 $70,779 N/A $35,987 $30,535
PAYE $148 $471 $67,980 $13,808 $23,991 $44,838
ICR $360 $449 $64,832 $0 $47,424 $16,150
Where Can I Learn More?
Employment Certification Form:Employment Certification Form:
http://studentaid.ed.gov/sites/default/files/public-service-employment-certification-form.pdf
Loan Consolidation: http://studentaid.ed.gov/repay-loans/consolidation Loan Deferment: http://studentaid.ed.gov/repay-loans/deferment-forbearance Loan Repayment Plans: y http://studentaid.ed.gov/repay-g y
loans/understand/plans
Public Service Loan Forgiveness: http://studentaid.ed.gov/publicservice
