This guide provides information about two new federal programs that could help make student loans easier to pay back. All full-time Head Start employees can use this information to apply for a reduction to their monthly student loan payments and begin down the path to loan forgiveness.
On July 1, 2009, two new federal loan programs went into effect that can make it easier for Head Start employees to pay for higher education.
The first, called Income-Based Repayment, limits loan repayments for anyone found to have a high amount of debt compared to their income. Once approved, payments will generally be reduced to less than 10 percent of your income depending on your family size and other factors. If you earn below 150 percent of the poverty level for your family size, your payment will be $0. After 25 years, the government will forgive all debt, including interest.
The second program is called the Public Service Loan Forgiveness Program. It guarantees that workers in social service and nonprofit fields will be forgiven for the rest of their debt after 10 years (120 payments). This program applies to all Head Start employees, not just teachers.
(To learn more about other teacher and child care loan forgiveness programs view Student Loan Forgiveness and Child Care Provider Loan Forgiveness Program.)
Here are a few examples of how these programs could work for you:
|If you are:||With:||Earning:||And you owe:||You will pay:||And be debt free in:|
|A single Head Start employee||No Children||$25,000 a year||$40,000||$110 per month||10 years|
|A single Head Start employee||2 Children||$30,000 a year||$20,000||$30 per month||10 years|
|A married Head Start employee||2 Children||$80,000 a year (combined family income)||$40,000 in debt||$590 per month||10 years|
|A married Head Start employee||1 Child||$26,000 a year (combined family income)||$80,000 in debt||$0 per month||10 years|
For a quick explanation of Income-Based Repayment, watch Ditch Your Debit Gremlin.
- Anyone found to have a high amount of student debt compared to their yearly income can qualify for Income-Based Repayment.
- You must have Direct or Guaranteed (or FFEL) loans.
Use this online calculator to find out if you qualify for IBR and to receive an estimate of your monthly payments.
Public Service Loan Forgiveness:
- To qualify for the Public Service Loan Forgiveness Program you must have Direct loans (Federal Direct Stafford Loans Subsidized and Unsubsidized, Federal Direct PLUS Loans, and Federal Direct Consolidation Loans).
- You must also work full time for a public service or nonprofit organization, such as Head Start, at the time you apply for the program, as you make your 120 payments, and at the time your debt is forgiven.
Read this handout for more information about qualifying for Public Service Loan Forgiveness.
- Visit the Federal Direct Consolidation Loans Information Center for information on how to consolidate your student loans.
- Retrieve your loan information from the National Student Loan Data System.
Income-Based Repayment and Public Service Loan Forgiveness may not be a good fit for everyone.
- If you think you may be able to pay off your full loan in less than 10 years, you could end up paying more with these programs because they do not stop interest from adding to the cost of your loan.
- Current IBR rules use your and your spouse's combined income to figure out what monthly payment you can afford. However, they do not consider your combined student debt. This means that if your spouse has a high income, even if he or she also has high student debt, you may not qualify for IBR or may not receive as high of a reduction. This rule could change in 2010. Select this link to learn more about IBR and Married Borrowers.
- You cannot apply for IBR if your loan is currently in default. Once you rehabilitate or consolidate your loans you will be able to apply. For information on how to get out of default, select A Resource for Borrowers, Their Families Advocates.
Contact your loan provider directly to sign up for these programs.
If you feel you will be unable to make your loan payments while your eligibility for these programs is determined, you can ask for a forbearance. During the forbearance you are not required to make any payments. Select Postponing Repayment for more information.