1. Income Driven Repayment Plans & Public Service Loan Forgiveness NYSFAAA Conference 2018 Graduate/Professional Symposium B.J Revill Director of Financial Aid & Resident Debt Advisor University of Rochester School of Medicine and Dentistry

2. Agenda
Review of Income Contingent Repayment (ICR), Income Based Repayment (IBR), Pay as You Earn (PAYE), & Revised Pay as You Earn (REPAYE) vs. Standard Repayment
In-Depth Look at Public Service Loan Forgiveness (PSLF)
How to use an Income Driven Repayment plan in conjunction with PSLF
Considerations prior to entering repayment

3. About the University of Rochester School of Medicine & Dentistry
Enrollment
Approximately 430 MD students
Approximately 400 PhD students
Approximately 200 Masters students
COA (for MD Program) = $76,456
Average Debt for the Class of 2017:
Class of 2017
Public
Private
All
UR SMD
Percent with Debt
77%
72%
75%
79%
Average
Debt*
$181,179
$206,204
$190,684
$155,026
* These statistics represent all education debt (including both medical and premedical education) for indebted students.

4. Fun Facts…

5. Standard Repayment Fixed Monthly Payment
10 year repayment term (standard amortization)
Use to repay:
Direct Loans
FFEL Loans
PLUS Loans
Consolidation Loans
Lowest cost of total repayment vs. other plans
All borrowers are eligible

6. Income Driven Plans Income Contingent Repayment (ICR)
Payments are adjusted annually, based on borrower’s household income, family size, and total loan debt.
If Married – Spouse’s income included only if borrower files “joint” tax return.
Maximum of 25 year repayment period
Payments are the Lesser of:
The amount you would pay if you repaid your loan in 12 years multiplied by an income percentage factor that changes with your annual income, OR
20% of your monthly discretionary income
Any remaining balance forgiven after 25 years.

7. Income Driven Plans
Income Based Repayment (New IBR) (for new borrowers on or after 07/01/2014)
The IBR program loan payments are 10% of your income that exceeds 150% of the federal poverty guideline for your family size.
Capped at the 10-year standard repayment amount
Adjusted annually, based on changes to your annual AGI and family size
If Married – Spouse’s income included only if borrower files “joint” tax return.
A borrower can choose to participate in this payment plan for up to 20 years.
Any remaining balance forgiven after 20 years.
The same as Pay As You Earn

8. Income Driven Plans
Income Based Repayment (IBR) (for borrowers with loans taken prior to 07/01/2014)
The IBR program loan payments are 15% of your income that exceeds 150% of the federal poverty guideline for your family size.
Capped at the 10-year standard repayment amount
Adjusted annually, based on changes to your annual AGI and family size
If Married – Spouse’s income included only if borrower files “joint” tax return.
A borrower can choose to participate in this payment plan for up to 25 years.
Any remaining balance forgiven after 25 years.

9. Income Driven Plans cont.
Pay As You Earn (PAYE)
The PAYE program loan payments are 10% of your income that exceeds 150% of the federal poverty guideline for your family size.
Only borrowers who had new loans as of 10/01/2007.
Capped at the 10-year standard repayment amount
Adjusted annually, based on changes to your annual AGI and family size
If Married – Spouse’s income included only if borrower files “joint” tax return.
A borrower can choose to participate in this payment plan for up to 20 years.
Any remaining balance forgiven after 20 years.

10. Income Driven Plans cont.
Revised Pay As You Earn (REPAYE)
The PAYE program loan payments are 10% of your income that exceeds 150% of the federal poverty guideline for your family size.
Not capped at the 10-year standard repayment amount
Adjusted annually, based on changes to your annual AGI and family size
If Married – Formula looks at total household income regardless of filing status.
A borrower can choose to participate in this payment plan for up to 25 years.
Any remaining balance forgiven after 20 years (for Undergrad only debt) or 25 years (for Grad/Professional debt).

11. Income Driven Plans cont.
PAYE/REPAYE/New IBR can be used to repay:
Federal Direct Stafford Loans (Subsidized or Unsub.)
Federal Direct GradPLUS Loans
Federal Direct Consolidation Loans
IBR Can be used to repay:
Also available for all FFELP Loans.

12. Income Driven Plans cont.
Partial Financial Hardship
For the borrower to qualify for IBR, New IBR, or PAYE, he/she must have a “Partial Financial Hardship” (PFH) to enter the plan. PFH is based on:
Adjusted Gross Income (AGI)
Household size
HHS Federal Poverty Guidelines (

13. Income Driven Plans cont.
Adjusted Gross Income (AGI)
Includes:
AGI of borrower
AGI of borrower’s spouse if married and filing a joint tax return. (Does not include spouse’s AGI if couple files separate federal income tax returns.) – ICR, IBR/New IBR and PAYE
AGI of borrower’s spouse if married (regardless of filing status) – REPAYE only
Household Size
Borrower
Spouse (if married)
Dependent children in household (including an unborn child)
Other dependents living in the household (must receive at least 50% of their support from borrower)

14. Income Driven Plans cont.
HHS Federal Poverty Guidelines (
2018 Poverty Guidelines for the 48 Contiguous States
Persons in Family
Poverty Guideline
150% Poverty 1
$12,140
$18,210 2
$16,460
$24,690 3
$20,780
$31,170 4
$25,100
$37,650 5
$29,420
$44,130 6
$33,740
$50,610 7
$38,060
$57,090 8
$42,380
$63,570

15. Income Driven Plans cont.
Partial Financial Hardship
Loan payments will be limited to 10% (15% for IBR) of a borrower's “discretionary income” or 10% (15% for IBR) of the amount that a borrower's (and spouse's if applicable) Adjusted Gross Income exceeds 150 % of the poverty line, divided by 12
10% of your household’s “Discretionary” Adjusted Gross Income (AGI)
(15% for IBR)
“Partial Financial Hardship” (PFH) amount
Your annual loan payment using the “Standard 10-Year Fixed repayment Plan”
“Standard Repayment” Amount
>

16. Income Driven Plans cont.
Estimated Monthly Payment Comparison:
Adjusted Gross Income
Standard Monthly Payment
IBR Monthly Payment (estimate)
PAYE/REPAYE/New IBR Monthly Payment (estimate)
$40,000
$1,162
$272
$181
$45,000
$335
$223
$50,000
$397
$265
$55,000
$460
$307
$60,000
$522
$348
$65,000
$585
$390
Assumptions: Household Size = Uses 2018 Federal Poverty Guidelines
Resides in Lower Loan Debt at repayment = $100,760
Average Interest Rate = 6.85%

17. Income Driven Plans cont.
Additional Details cont.:
PAYE, REPAYE, IBR/New IBR & ICR repayment period can extend beyond 10 years
Outstanding loan balance is forgiven after:
PAYE - 20 years of repayment
New IBR - 20 years of repayment
IBR - 25 years of repayment
ICR - 25 years of repayment
REPAYE – 20 years for undergrad debt only, 25 years with grad/professional debt
Monthly payment can be less than accrued interest
allows for negative amortization!

18. Beware of Negative Amortization
Income Driven Plans cont.
Beware of Negative Amortization
Federal Stafford Loan Debt (unsub)
$50,000
$75,000
$100,000
Estimated Monthly Payment
(Standard 10-year plan)
$556
$834
$1,113
Interest paid in 1st month
$252
$378
$504
Principal paid in 1st month
$304
$456
$609
Resulting principal balance
$49,696
$74,544
$99,391
PAYE/REPAYE/NEW IBR monthly payment in 1st month*
$223
Unpaid interest after 1st month
$29
$155
$279
Resulting Principal balance**
$50,029
$75,155
$100,279
*Assumes a single household & $45,000 AGI
** When Capitalization Occurs

19. Income Driven Plans cont.
Additional Details:
Under REPAYE, PAYE, New IBR and IBR the U.S. Dept. of Education will pay some of the unpaid interest.
Once in the PAYE, New IBR or IBR Plan, monthly payment is lesser of:
Standard 10-year amortized amount OR,
“Partial Financial Hardship” amount
REPAYE
PAYE
New IBR/IBR
ICR
Subsidized
Loans
100% for 3 years
50% for remaining time 0%
Unsub. Loans
50% for entire time

20. Income Driven Plans cont.
Pros and Cons:
Potential Pros
Lower monthly payments
Possible to exclude spouse’s income (PAYE, IBRs, and ICR)
Dept. of Ed. may waive some unpaid interest
Loan cancellation after 20/25 years of eligible payments
Good option for borrowers interested in PSLF
Potential Cons
Increased interest payments (vs. standard 10-year plan)
Negative amortization possible
May need to file separate tax returns if married (PAYE, IBRs and ICR)
Income and family size need to be verified annually
Monthly payments could change each year

21. Public Service Loan Forgiveness Program

22. Public Service Loan Forgiveness
Borrowers will qualify for loan forgiveness if:
Have outstanding debt through the Direct Loan Program, and
Worked full-time for a total of 120 months in a qualifying “public service” position (on or after Oct. 1st, 2007), and
Made 120 qualifying loan payments on Federal Direct Loans during periods of qualifying public service employment

23. Public Service Loan Forgiveness cont.
Eligible Loans
Qualifying loan payments made on or after Oct. 1, 2007.
Loans Eligible for forgiveness are:
Federal Direct Stafford Loans
Federal Direct Graduate PLUS Loans
Federal Direct Consolidation Loans

24. Public Service Loan Forgiveness cont.
Eligible Loans cont.
The Following federal student loan programs may also be eligible for PSLF with Direct Loan Consolidation:
Any FFELP Loan
Stafford
PLUS
Consolidation Loans
Federal Perkins Loans
Certain Nursing & Health Professions Loans

25. Public Service Loan Forgiveness cont.
Definition of “Public Service”
In general, it’s full-time employment in:
Government (federal, state, county, local, tribal, etc…) agency
A 501(c)(3) organization that is exempt from taxation under section 501(a) of the Internal Revenue Code of 1986
The most common types of 501(c)(3) organizations are charitable, educational, religious, or healthcare
Other non-profits that are not 501(c)(3) , but provide a qualifying public service

26. Public Service Loan Forgiveness cont.
Qualifying Payment Requirements:
Borrower must not be in default
Borrowers must make 120 scheduled on-time payments (no more than 15 days late)
Make qualifying payments using:
Pay As You Earn (PAYE), or
Revised Pay As You Earn (REPAYE), or
Income Based Repayment (New IBR or IBR), or
Income Contingent Repayment (ICR), or
Standard (10-year) Repayment plan

27. Public Service Loan Forgiveness cont.
Additional Eligibility Provisions:
120 months do NOT have to be consecutive
Borrower must be working “full-time” in qualifying public service position at time of forgiveness (Full time as defined by their employer, but no less than an average of 30 hours/week).
Loan payments made on any loan prior to October 1, 2007 do NOT count toward the 120-month requirement
Loan payments on non-eligible loans (e.g., FFELP loans, Federal Perkins Loans) do NOT count toward 120-month requirement
Any amounts cancelled in the program are not taxable!

28. Income Driven Plans & PSLF (Calculations)

29. Public Service Loan Forgiveness cont.
Example 1: enter Repayment after graduation
Loan Debt Borrowed = $91,000
Approx. total at Repayment (including accrued interest) = $100,760
Average Interest Rate – 6.85%
Standard Repayment Plan (10 years)
Federal student loan debt (at repayment)
$100,760
Estimated monthly payment - Standard Plan
$1,162
Total interest paid
$48,456
Total amount repaid after 10 years
$139,456
Extended Repayment Plan (25 years)
Federal student loan debt (at repayment)
$100,760
Estimated monthly payment - Extended Plan
$703
Total Interest paid
$119,761
Total amount repaid after 25 years
$210,761

30. Public Service Loan Forgiveness cont.
Example 2: IBR or PAYE & PUBLIC SERVICE LOAN FORGIVENESS
Loan Debt Borrowed = $91,000
Loan Debt at Repayment = $100,760
Starting Salary = $50,000
IBR
PAYE/REPAYE/New IBR
Estimated monthly payment: Year 1
$397
$265
Estimated monthly payment: Year 2
$416
$277
Estimated monthly payment: Year 3
$435
$290
Estimated monthly payment: Year 4
$455
$304
Estimated monthly payment: Year 5
$476
$317
Estimated monthly payment: Year 6
$497
$331
Estimated monthly payment: Year 7
$519
$346
Estimated monthly payment: Year 8
$541
$361
Estimated monthly payment: Year 9
$564
$376
Estimated monthly payment: Year 10
$587
$392
Total amount repaid over 10 years
$58,664
$39,109
Total Unpaid Interest:
$10,509
$29,911
Total Unpaid Principal:
$100,608
$100,760
Total amount forgiven after 10 years
$111,117
$130,671
Assumes a family size of 1 for entire repayment term, and a 3% income growth.

31. Public Service Loan Forgiveness cont.
A few Points to Ponder:
Borrower is required to work full-time in a qualified public service position for a minimum of 120 months.
Borrower must make qualifying monthly loan payments during the entire 120 month period of public service employment.

32. Public Service Loan Forgiveness cont.
Pros and Cons
Potential Pros
May make it financially possible to pursue a public service career
A portion of loan debt may be forgiven
Entitlement (not subject to appropriations)
Potential Cons
It is an “All or Nothing” benefit. Borrower must put in the full 10 years (120 months).
Only Direct Loans can be forgiven
Will there be any debt left after 10 years of repayment to forgive?
Will the program exist after 10 years?

33. Public Service Loan Forgiveness cont.
Considerations prior to entering Repayment:
Consider consolidating any FFEL and/or Perkins Loans into the Direct Loan Program. Can be done at
Select either the PAYE, REPAYE, IBR/New IBR or Income Contingent Repayment (ICR) plan
Start making payments
Complete PSLF Employment Cert. Form annually
Keep good records!

34. Public Service Loan Forgiveness cont.
Record Keeping
Complete the PSLF Employment Cert. Form
PSLF Employment Certification Form allows for confirmation of employment eligibility by Dept. of Ed
Annual submission recommended

35. Public Service Loan Forgiveness cont.
Record Keeping cont.
Suggested that borrowers also keep the following:
Evidence they worked full-time in every month they made a qualifying loan payment
Documentation that their position meets the “full-time” employment standard
Documentation that their employer is an eligible employer
Documentation that they made an on-time payment

36. Helpful Links Income Driven Repayment Plans Q & A
Public Service Loan Forgiveness Q & A

37. Questions?

38. Contact Info:
B.J. Revill
Director of Financial Aid
& Resident Debt Advisor
Univ. of Rochester School of Medicine & Dentistry