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With 45 million student loan borrowers in the US, the student loan debt is a huge burden for many. The average student graduates with $37,500 in debt. So where to even begin?
Yahoo Finance had a team of experts answer your questions. We covered it all in our livestream, and are answering a few more of your questions below.
Yahoo Finance reporter Jeanie Ahn teamed up with HuffPost reporters Casey Bond and Michael Hobbes, and Journey to Launch podcast host Jamilla Souffrant to answer your questions. We covered it all in our livestream, and are answering a more of your questions below.
Q: I have been sick for many years and have my loan deferred. Is there a way to get it legally forgiven?
Yahoo Finance Reporter Jeanie Ahn: If your medical condition has not improved and you’re unable to work because of a permanent disability, you can apply for a total and permanent discharge (TPD). If you’re eligible, you will no longer have to repay the following Federal loans: Direct Loans, Perkins loans, Family Education loans, and TEACH loans. But you need to prove to the Department of Education that you are completely unable to work and earn a living to repay these loans. Private loans, on the other hand, will be tough to get out of.
If you eventually feel better and are able to get back on track, look into one of the four income-driven repayment plans that works best for your budget:
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Revised Pay As You Earn Repayment Plan (REPAYE plan)
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Pay As You Earn Repayment Plan (PAYE Plan)
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Income-Based Repayment Plan (IBR Plan)
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Income-Contingent Repayment Plan (ICR Plan)
For all of these plans, your remaining balance is forgiven once you’ve reached the end of the repayment period (typically 20 years). One thing to keep in mind is that the year your remaining balance is forgiven, you will be taxed on that amount.
Q: If I’m already on an income-based repayment plan (I’m on IBR), can I switch to another plan, like PAYE or REPAYE without restarting the clock toward forgiveness? I owe $120k and am wondering if I made the wrong choice.
HuffPost Lifestyle reporter Casey Bond: Yes, you can! According to the Department of Education’s website, if you switch from one income-driven plan to another, payments made under both plans should count toward the 20-25 years required for forgiveness (as long as you meet all the other requirements of the plan(s) as well). Also, if you switch from the standard repayment plan to an income-driven repayment plan, payments you made on the standard plan will count toward those 20-25 years of payments as well.