Question: when is education NOT the key to success?

Answer: When the burden of debt acts as an anchor to your personal finances

When I heard the concept “education debt relief”, I was all ears.  It’s not just homeowners that are catching a break with loan modifications. New government programs allow students or former students to benefit from programs that do not require that the borrowers negotiate with their lenders.

The federal government is making federal student loan payments more affordable with two programs, the Income Based Repayment (IBR) plans and the Public Service Loan Forgiveness program.

  • The goal of the Income Based Repayment plan is to modify your loan so that it approximates 10% of your total income. And if you have not paid off your debt in 25 years, it is forgiven. For a college graduate just starting out, this could be a major advantage.
  • Your payments may be even lower under the Public Service Loan Forgiveness program and you only have to wait ten years to have your debt forgiven. This program is for full time, at least 30 hours per week, employees of a governmental entity or a non-profit.

What determines if you qualify?

  • The type of debt – needs to be direct and guaranteed by United States government for loans made to the students. Sorry parents — PLUS loans are not included in the program.
  • How do I know if I qualify? – The easiest way is to check the IBR calculators at
  • The factors are: the poverty level for your state, your Adjusted Gross Income, your family size, and the amount of debt.

You apply directly through your lender. So you might need to research who is actually servicing your loan. Go to

If you’re making less than the poverty level, or may be still looking for that first job while living at home, you may not have to make any payment. The cap is set at 15% of the amount that your AGI exceeds 150% of the poverty level.

If you are already begun working at a non-profit, you will be credited for work after October 1, 2007. And, sorry, these repayment plans are for debt incurred before the program began in July 1, 2009. Future debt will not qualify at this time.

So who is paying the subsidized interest? How does it work? The federal government makes up the difference for the first three years, and then it’s rolled into the loan. If you still owe it after the respective 10/25 years, then it once again is paid by the federal government when the remainder of the loan is forgiven.

What are the tax effects? Right now, the debt forgiven is taxable. There is a bill, US. House of Representatives, H.R. 2492 that will make the debt forgiveness a non-taxable event.

I hope one of these plans will be of use to you or a student close to you. If you or your children don’t benefit from these programs, there are still plenty of reasons for us to talk. I can advise you on how to save for education, reposition your portfolio to prepare for paying for your children’s college expenses and the choices around when and who should pick up the expenses. I am available for complimentary initial meetings to see if the services I offer are a good match for the services you need.