Mailbag Quetstion: Can I retroactively sign up for IBR for public service loan forgiveness?

Michael Lux Blog, Mailbag, Student Loans 2 Comments

This week I received a very interesting question from a reader.  She wanted to know if she could “retroactively” sign up for Income Based Repayment Plan.  Because she had been working for years in a public interest job, she was very disappointed to learn that her graduated repayment plan payments would not count towards the required 120 for student loan forgiveness.  She went as far as saying that she wasn’t looking for a refund for the extra money that she paid, just credit for her time in public service.

Unfortunately, no such mechanism exists.  As we have recently seen, there is growing interest within the government to limit public interest loan forgiveness.  Payments made under one repayment plan cannot simply be reclasified in order to count for public service.

For those who are curious, payments made under the following plans count towards public service loan forgiveness:
– Pay As You Earn
– Income Based Repayment
– Income Contingent Repayment
– The 10 year standard repayment plan
“any other repayment plan where your monthly payment amount equals or exceeds what you would pay under a 10-Year Standard Repayment Plan”

Unfortunately, the graduated repayment plan is the plan that will likely cause the most people to miss out on public interest student loan forgiveness.  Another plan that is similarly not eligible for public service loan forgiveness is the extended repayment plan.

The moral of the story here is that if there is even a chance that you will one day be interested in public service student loan forgiveness, make sure you get signed up for an income based repayment plan.  Some people fear these plans because the low minimum payments allow interest to accumulate and they want to get their debt paid off sooner rather than later.  This type of thinking is commendable and would be really smart, except for one fact… there is no maximum payment under IBR and the other income based plans.  If you are on the graduated or extended repayment plans and want to stick with those payments, you can continue to do so even if you sign up for IBR.  The only difference is that you keep your Public Service loan forgiveness eligibility.

Example: IBR only requires $100 a month, but you can pay the $200 a month required on the extended repayment plan. 
–> If you switch to IBR, you can still pay the $200 a month to avoid the extra interest, but now your payments also count for Public service loan forgiveness.  Additionally, if money is really tight for one month, you can get away with paying a little less.

As discussed in our overview of the repayment plans, the creation of IBR and PAYE outdated many of the previous “best” repayment plans.  Issues with Public service loan forgiveness is just one example of why they are better.

  • Gue1

    I am in the same situation, except when applying for IBR i get told I either DONT qualify or I have to pay more with IBR plans than my graduated payments I already can barely afford. I have a private loan for way more that the formula doesn’t take into account, and have been working in public service the last 5 years. This is such a devastating loop hole, it really makes me angry.

    • Have you looked into revised pay as you earn? It could potentially result in payments lower than the IBR payments. It won’t fix the issue of correcting your last 5 years worth of payments, but REPAYE is eligible under the public service student loan forgiveness.