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Federal Employee Student Loan Forgiveness Program

July 1, 2009

Congressman John Sarbanes (D-MD) and Office of Personnel Management (OPM) Director John Berry were scheduled to unveil a new student loan forgiveness opportunities for individuals who enter careers in public service and the non-profit sector including teachers, many health professionals, civil servants, and public interest attorneys.

The Public Service Loan Forgiveness Option, which Congressman Sarbanes authored and became law in 2007, allows individuals who work in public service and make regular loan payments to have the balance of their student loans forgiven after ten years.

According the Sarbanes' website, starting July 1st, individuals with student loans will also be able to enter into an Income-Based Repayment (IBR) plan that will lower their monthly payments based on a debt to income ratio, which can be calculated at:

Sarbanes' office gave an example of how the Public Service Loan Forgiveness Option works below:

  • Jane Student graduated with $100,000 in qualifying debt at 6.8 percent interest and took a full time public service job starting at $40,000 with annual increases of 5 percent.
  • Jane elects the IBR plan. In her first year, Jane's monthly payments under IBR are $309 (as opposed to $1151 under standard 10-year repayment). 
  • As Jane gets annual salary increases of 5 percent, her monthly payments under IBR gradually rise, until in year 10 her monthly payments are $526.
  • Jane stayed in public service and paid $49,132 over 10 years under the IBR plan.  The remaining principal and interest, $118,868, is forgiven.