By Eric Olsen Executive Director HELPS Nonprofit law firm, www.helpsishere.org
You may have received a notice about a defaulted student loan and do not know what to do. There are many articles on the internet with incomplete information that scare seniors into thinking that they are going to lose their social security. This article will explain options about past due student loans, specifically how to apply for a federal income based repayment plan.(IBR) In many cases lower income seniors and other persons have to pay nothing or very little.
This program only applies to federal public student loans. Private student loans do not qualify for federal income contingent repayment plans. However social security or other retirement income is protected from garnishment for private student loans debt under federal law. Seniors can choose to not pay private student loans.
It is not a current practice for lenders to file lawsuits for repayment of student loans. Although it is not common, it is possible for federal student lenders to garnish 15% of a person’s social security. You will be notified in writing of the lenders intent to garnish social security. In almost all cases garnishment of social security for student loans can be prevented when certain steps are taken. They cannot garnish other retirement income like pensions.
The Income based repayment plan (IBR) is a federal repayment plan based on your income. It caps your required monthly payment at an amount intended to be affordable based on your income and family size. So for most HELPS clients your family is you alone or you and your spouse.
Let me give me explain and provide examples. If your gross income is less than 150% of the poverty line your payment would be $0 per month. For one person in 2017 that is $1485 per month and $2002 per month for two persons. The monthly amount you might have to pay on the loan goes up little by little as income increases. For example one person making $1666 per month or $20,000 a year would have a payment at right around $25 per month. A website provided below will allow you to calculate your payment.
I am the Executive Director of HELPS, a nonprofit law firm that protects seniors from unwanted collector contact. We often counsel seniors with past due student loans. In most cases, the seniors we help have qualified for $0 dollars payment per month. The borrower needs to re-apply each year, but as long as circumstances do not significantly change, the payment amount will remain the same.
There are a lot of websites where you can enter information to find out if you qualify for an IBR payment. We recommend you contact this website.
Here are the steps to apply for IBR.
1. You can fill out the easy form on the front of that website. That will tell you if you qualify and how much your payment likely will be. Again, for lower income seniors that payment is often $0.
2. If you want to apply for income based repayment, you need to telephone your lender or loan servicer.
3. Explain that you are on social security and want to apply for an income driven repayment plan.
4. If your social security is presently being garnished you will want to explain that.
5. You can apply online or by submitting a paper application. You will directed on how to obtain an application form. They will give you the address where to send the form.
6. HELPS will provide to any senior, for free, an application form and an application copy with written suggestions and tips in order to help you complete the application.
7. People sometimes get confused about whether to include their spouse’s income on the application. If you file joint returns, yes. If not, then yes but their income will not be used to determine the amount you have to pay. If you are separated you do not need to include their income.
8. Here is a link to questions and answers you can review from a government website.
9. When the form is completed you will send it to the lender or loan servicer for processing at the address they gave you when called at first as explained in number 2.
10. You will need to complete this form annually or as otherwise instructed.
If you are already being garnished, the loan servicer will normally need 30-60 days to stop any garnishment of social security. It is always best to file the application for IBR before social security is garnished.
Remember arrangements for IBR are made through your specific lender or whomever currently services the loan. More information may also be obtained by calling: Federal Student Aid Information Center (FSAIC): 1-800-4-FED-AID (1-800-433-3243) -TTY (for the hearing impaired): 1-800-730-8913.
If you need more help, you can also contact HELPS Nonprofit Law Firm at 855 435 7787 and we will be happy to answer questions.