1. Income-Driven Repayment Plans & Public Service Loan Forgiveness
U.S. Department of Education

2. Income-Driven Plans - Overview
Three main plans
Income-Contingent Repayment Plan (ICR) – 1994
Direct Loan Program only
More information available at StudentAid.gov/ICR
Income-Based Repayment Plan (IBR) – 2009
Available in both the Direct Loan and FFEL Program
More information available at StudentAid.gov/IBR
Pay As You Earn Plan – 2012
For new borrowers in FY 2008 who receive new loans in FY 2012
Modeled on IBR, incorporating statutory IBR changes scheduled to take effect for new borrowers in 2014
More information available at StudentAid.gov/PayAsYouEarn

3. Income-Driven Plans – Eligible Borrowers
ICR:
Direct Loan borrowers with eligible loans
IBR:
Direct Loan and FFEL Program borrowers with eligible loans and
Their payments would be lower on IBR relative to what would have been paid under the 10-year standard repayment plan (called “partial financial hardship”)
Pay As You Earn:
Must be a new borrower on/after 10/1/2007 who received new loan on/after 10/1/2011 and
Their payments would be lower on Pay As You Earn relative to what would have been paid under the 10-year standard repayment plan (called “partial financial hardship”)

4. Income-Driven Plans – Eligible Loans
ICR:
All Direct Loans are eligible except parent PLUS Loans and pre-7/1/2006 Direct PLUS Consolidation Loans
Direct Consolidation Loans made on/after 7/1/2006 that repaid parent PLUS loans are eligible
IBR:
All Direct and FFEL Program loans except parent PLUS loans and Consolidation Loans that repaid parent PLUS loans
Pay As You Earn:
All Direct Loans are eligible except parent PLUS loans and Consolidation Loans that repaid parent PLUS loans

5. Income-Driven Plans – Payment Amounts
Under ICR, borrowers pay the lesser of:
12-year standard repayment schedule multiplied by income percentage factor (payment based on loan debt and income) or
20% of discretionary income (payment based only on income)
Under IBR, borrowers pay the lesser of:
15% of discretionary income (income-based payments) or
What they would have paid under the 10-year standard repayment plan (non-income-based payments)
Under Pay As You Earn, borrowers pay the lesser of:
10% of discretionary income (income-based payments) or
For more on income percentage factors in ICR, see 77 FR 30266, available at:

6. Income-Driven Plans – Loan Forgiveness
All three plans provide for forgiveness
For ICR and IBR, remaining balance forgiven after 25 years of qualifying repayment
For Pay As You Earn, remaining balance forgiven after 20 years of qualifying repayment
For all three plans, 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 equal to the 10-year standard plan amount) or
Economic hardship deferment
According to the IRS, the forgiven amount is considered taxable income

7. Applying: Income Documentation
Borrower must submit income documentation when applying
Eligibility (IBR & Pay As You Earn) and payment amount (all three plans) usually based on a borrower’s AGI
Borrower may document AGI through:
The electronic application (uses same method as IRS data retrieval tool for the FAFSA to document AGI)
A paper copy of a 1040, 1040A, or 1040EZ (signed or unsigned)
An IRS Tax Return Transcript

8. Applying: Income Documentation
If AGI is not available or does not reasonably reflect current income, borrower can submit alternative documentation of income (ADOI)
Borrowers must provide documentation of all taxable income, e.g., pay stubs, unemployment benefits, etc.
Loan holder estimates annual taxable income based on this documentation
Borrowers do not provide documentation of untaxed income, such as Supplemental Security Income or welfare

9. Recertifying: Income and Family Size
Under all three plans, borrowers are required to submit updated income documentation annually
Failure to submit documentation timely will lead to:
A monthly payment amount that is what it would have been on the 10-year standard repayment plan (non-income-based payment) and
Interest capitalization
Borrowers must also annually certify their family size or a family size of one will be used
The reevaluation date is based on when the borrower initially entered the plan (anniversary date)
Borrower can also submit documentation early, if their circumstances have changed, to receive a lower payment amount. This changes their anniversary date
Borrowers can use the electronic application to recertify their income and family size

10. Public Service Loan Forgiveness
Public Service Loan Forgiveness (PSLF) provides for forgiveness of a Direct Loan borrower’s remaining loan balance if the borrower:
Makes 120 full, on-time payments after October 1, 2007
Makes each payment under a qualifying repayment plan
Makes each payment while employed full-time by a qualifying organization
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

11. PSLF – Qualifying Payments
Borrower must make 120 separate monthly payments. They:
Do not need to be consecutive
Must be for the full scheduled payment under the repayment plan
Must be made within 15 days of the due date
Multiple, partial payments during the borrower’s monthly billing cycle will qualify if they add up to equal 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

12. PSLF – Qualifying Repayment Plan
Each of the 120 payments must be made under a qualifying repayment plan
Qualifying repayment plans:
10-year Standard Repayment Plan
IBR, ICR, Pay As You Earn plans and
Any other payment plan where the payment amount at least equals the 10-year Standard Repayment Plan amount
Non-qualifying repayment plans include:
Extended (Fixed or Graduated)
Graduated and
Consolidation Standard with term greater than 10-years
Income-driven plans are most likely to leave a remaining balance for forgiveness after 120 qualifying payments

13. PSLF – Eligible Loans PSLF is only for Direct Loans
All Direct Loans qualify
Parent Direct PLUS Loans are eligible for PSLF, but cannot be repaid under income-driven plans
Borrowers may consolidate parent PLUS Loans and repay under ICR
FFEL Program and Perkins Loans do not qualify, but can be consolidated into a Direct Consolidation Loan
Borrower consolidating Perkins Loans will lose Perkins-only cancellation benefits they may have otherwise been able to receive
Payments made on loans that are later consolidated do not count toward 120 payments for PSLF. Borrower must make 120 qualifying payments on the Direct Consolidation Loan

14. PSLF – Qualifying Employment
Each of the 120 payments must have been made during a period of qualifying employment
Qualifying employment includes any job at:
A government organization
A not-for-profit, 501(c)(3) organization or
Any other not-for-profit organization that is not a labor union or partisan political organization and that provides public services in the following categories:
Emergency management, military service, public safety, law enforcement, public interest legal services, early childhood education, public service for individuals with disabilities, public health, public education, public library services, school library services, or other school-based services
Borrower can work at multiple organizations while making the required120 payments

15. PSLF – Qualifying Employment
Must be a full-time employee or work multiple part-time jobs that equal full 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 with multiple employers, full time is an annual average of at least 30 hours per week
Exception for employees under contract for at least eight months per year (e.g., teachers), full time is an average of at least 30 hours per week
For borrowers working for a not-for-profit 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 employee requirement

16. PSLF – Employment Certification
On January 31, 2012, the Department released a voluntary Employment Certification Form that borrowers can submit to the Department for a determination of whether their employment and payments qualify for PSLF
Borrower has employer complete employment verification section
Borrower submits form to FedLoan Servicing (regardless of who current servicer is)
FedLoan Servicing determines whether employment qualifies
If employment qualifies, borrower’s loans are transferred to FedLoan Servicing, for a determination of how many qualifying payments were made during the period of employment
Borrowers loans remain at FedLoan servicing permanently
Borrower can submit the form as often as annually
For more, including Q&As, see StudentAid.gov/PublicService

17. 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
PSLF Forgiveness Application will be developed and released prior to earliest date of eligibility for PSLF