The Federal Student Loan repayment plan allows federal agencies to repayment financially supported students as an incentive or recruitment incentive for qualified candidates or employed employees of the agency. In addition, the program is intended to reward students who demonstrate an ability to efficiently and successfully pay off the debt of education through on-the-job training and experience. The goal is to help ensure that government employees receive fair wages and that they receive the skills and knowledge necessary for performing their jobs. All eligible employees are expected to be subject to the repayment plan either before or after having commenced employment with the federal government.
The qualifying amount for federal student loan repayment program is determined by the Expected Family Contribution (EFC) of each participating borrower. EFC is calculated by taking each borrower’s family size in order of numerical age, family income, and federal assistance programs used to pay for schooling. Borrowers must maintain these levels throughout their academic careers in order to maintain eligibility for the federal student loan repayment program. Students who do not meet the standard forgiveness eligibility are still eligible for reduced interest rates and pay down their balances. Furthermore, borrowers can continue to receive subsidized assistance while making higher payments until they reach their forgiveness eligibility.
There are two types of federal student loan repayment program forgiveness programs: direct loan forgiveness and education loan forgiveness. Education forgiveness provides education loan forgiveness if the student borrower has exhausted all federal assistance. Direct loan forgiveness is awarded for students who have exhausted the requirements for one of the federal direct loans, such as the Direct Loan and FFELP loans, or have excessively exhausted the waiting period for a federal direct loan or consolidate their student loans.
Direct Loans are made by the U.S. Department of Education and are awarded by the U.S. Department of Education to college or university students who qualify for need-based financial aid. A student may qualify for federal student loan aid based on Expected Family Contribution (EFC), a Student Aid Report (STR) or on Expected Family Contribution minus expected family contributions (EFC). Expected family contributions are a calculation used to compute a student’s eligibility for need-based aid. The number of children in a family does not affect the credit score of a student applying for federal student aid. Expected family contributions are included in calculating a student’s EFC.
The Federal Direct Loan Repayment program allows current employees who have fulfilled their enlistment or service obligation to defer their payments. Servicemen and women who wish to apply for deferment should contact their department to inquire about the application process. Eligibility for deferment varies from person to person, as each deferment will have different effects on a student’s eligibility for other federal assistance. An employee may be eligible for both deferment and forbearance. For example, an individual who is currently on active duty and currently qualified for Reserve Officers Training Corps (ROTC) or senior reserve officers training (Serves) may be eligible for one or the other.
Active duty members of the Selected Reserve who have served continuously for two years are considered eligible for income-based repayment. Individuals who have retired from commissioned service with a rank of senior grade or higher than the lowest enlisted grade can defer up to two years of payments under income-based repayment programs. Individuals who qualify for forgiveness must wait for five years after discharge from the Selected Reserve to begin receiving repayment. The amount of forgiven deferments varies by agency.
Repaying loans with interest while you are still employed with the same employer will not usually qualify for income-based repayment plans. Eligibility for income-based repayment programs is based on intent to repay. If your intent is to repay loan debt while you are unemployed or have temporarily lost your job through layoff, a loan forgiveness plan will most likely be available to you. For those intent on repaying their loans while in good standing with their current employer, an income-based repayment plan will likely be available to you.
Loan forgiveness programs are available for active duty personnel who meet specific requirements. Individuals must be currently serving in the Selected Reserve, or in the reserves and be in good or better health to meet program requirements. There is also a retention incentive associated with loan forgiveness. The U.S. Department of Education offers five U.S.C. dollars to each returning loan recipient who will repay his or her loans while working full-time in his or her current position.