I think this link http://www.finaid.org/loans/ibr.phtml explains it a little better.
Quote from: Clayton on February 10, 2008, 12:35:41 AMI think this link http://www.finaid.org/loans/ibr.phtml explains it a little better.Thanks for the links guys. Wow, this plan is as good as the best LRAP's I've seen. I'm sure its going to make my, and lots of other people's, decisions way harder. But in a good way. I wonder how it ineracts with individual university's Loan Repayment Assistance Plans? Obviously you can't get both benefits, so I can imagine this will make some school's plans obselete. Why would a university keep paying money when the federal gov't will just foot the bill.
My only other worry is that you'll have a potentially huge tax bill when the loan is forgiven. Say you pay off $60K of a $160K loan, then you'll have $100K added to your income in the 10th year, placing you in a rather high tax bracket and causing you to owe probably $30,000 on that income! This part seems like an oversight to me --saving that much on a NGO salary could be somewhat difficult, especially if you try to begin a family, too.
Yes, loan forgiveness is not taxable... provided that you stay in public interest for TEN consecutive years! What if you get that perfect private sector offer at 9.5 years? It is a great law, but keep in mind that it could be challenging to stay in public interest work for a full ten consecutive years. I wouldn't use this law as a license to rack up debt!