public service loan forgiveness

Consolidating My Student Loans

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Now that I have received all the student loans that I am going to receive I have begun the process of looking into consolidating my student loans. I have Subsidized Stafford Loans, Unsubsidized Stafford Loans, and Grad Plus loans with two different lenders. I’m not sure if my lenders would send me one bill each for all of my loans but I know when I log into my accounts they calculate the payment separately for each loan. Consolidating my loans will make paying back my loans simpler.

My primary reason for wanting to consolidate my loans is to take advantage of the Public Service Loan Forgiveness program. In order to qualify for this program you need to have your loans in the Direct loan program. It is my understanding that even if you have already consolidated your loans you can switch to the Direct loan program to take advantage of the Public Service Loan Forgiveness. This program will forgive remaining debt after 10 years of eligible employment and qualifying loan payments. That could end up being a great deal for me. The only downside is that the forgiven debt will be considered income which would result in a large tax bill.

Once I have completed the loan consolidation process I will provide an update on my experience getting my loans consolidated.

Law School Loan Forgiveness and Income Based Repayment

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I wrote a post about law school loan forgiveness and income based repayment back in March. At that time both were still proposals but back in October they became official after being passed by Congress.

It is nice to know that if I do 10 years of public service that my law school loans will be forgiven. It is even nicer to know that my loan payments will be capped at 15% of my income above 150% of the poverty level and any remaining balance will be forgiven after 25 years. I hope I’m not still paying on my student loans in 25 years but it is good to know that my payments will be capped at a level I can easily make.

The only drawback is that if I have loans forgiven they will be treated as income for that year. That would most likely result in a huge tax bill. I’m not going to worry about that for now though. If it appears likely that I will have my loans forgiven than I’ll come up with a strategy for dealing with the taxes at that time.