Good evening.
I’m really confused about how student loan forgiveness works, especially with interest, and could use some help.
So, let’s say I have $400K in student loans at a 7% interest rate. That’s $28K in interest each year. I make about $80K a year, and under the income-driven repayment (IDR) plan, I’d be paying 10% of my income, which comes out to $8K a year.The problem is, my payment doesn’t even cover the interest. Does that mean my loan balance will keep going up? Like, would next year’s interest be based on the new balance of $428K (the $400K plus the $28K interest)? Basically, do I start getting charged interest on the interest I couldn’t pay?
Also, let’s say I keep making minimum payments for the full 25 years and end up paying a total of $200K, but I still owe $200K after that. When the government forgives the $200K, do I get taxed on just that amount, or do I also get taxed on the unpaid interest that piled up?
Your assistance on this highly welcome…
After 120 qualified monthly payments are made while employed full-time by a government agency or nonprofit, any remaining federal student loan debt is forgiven.
For teachers who fulfill specific standards, up to $17,500 in federal student loan debt may be forgiven.
you might be asked to submit paperwork to some, while automated procedures might be used by others.
if you are eligible for student loan forgiveness. But interest accrued after the date of forgiveness will not be waived.
if you have issues about interest accumulation or are unclear whether forgiveness option is best for you.