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I’m a Teacher. How Can I Lower My PLUS Loan Payment?

By on March 8, 2016

Question:

Dear Steve,

My student loan (originally taken out for my children) is now owned by the government and administered by fedloan.gov. The loan is in my name alone — my wife is not on the loan.

1. Does filing separately exclude my wife’s income from consideration in an IBR? When I started with fedloan.gov my payments were $0, but they have been floating up since my wife inherited an interest in a family property.

2. To what extent does being a classroom teacher in a Title I school get my liability forgiven?

Kerr

Answer:

Dear Kerr,

I think what you are referring to is a Direct PLUS Loan you took out to pay for tuition. To be eligible for repayment under an income driven repayment plan you’d need to first drop the loan into a Direct Consolidation Loan. You can then select your repayment option.

The loan would then be eligible for the Income Contingent Repayment (ICR) plan, not the IBR. Under the ICR your payment would be the lesser of 20 percent of your discretionary income or what you would pay on a repayment plan with a fixed payment over the course of 12 years, adjusted according to your income.

If you are “married filing separately” then only your income will count towards the payment plan. Whatever you do, DO NOT go anywhere near the REPAYE repayment option. It will suck in all income regardless of filing status.

Once you consolidate and elect to repay the loan via the ICR program, you must make 120 full monthly ICR payments or regular payments and then the balance would be forgiven, tax free.

Your teaching would qualify under the Public Service Loan Forgiveness Program if you are employed at a non-profit school or a public school that provides public education. Since you said you are at a Title I school, I’m initially assuming you would qualify.

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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