There are two federal programs that eligible law school graduates may use to reduce their monthly loan payments:
Pay As You Earn (PAYE)
Pay As You Earn (PAYE) is a federal loan repayment program that helps borrowers keep their monthly loan payments affordable with payment caps based on income and family size. The amount you owe doesn't determine the amount you pay. Rather, the amount you pay is determined by your income and family size. PAYE will also forgive remaining debt, if any, after 20 years of qualifying payments.
Loan calculators can help you determine your estimated monthly loan repayments based on income and family size.
PAYE is available to most federal student loan borrowers and covers most types of federal loans made to students. To enter PAYE, you must have enough debt relative to your income to qualify for a reduced payment.
There are many factors to consider when evaluating PAYE. For example, while PAYE can significantly reduce your monthly loan repayment, you may be accruing additional principal and interest. Also, although there is loan forgiveness after a 20-year period, the amount of loan forgiveness may be taxable as income. Borrowers should carefully consider all the different issues related to PAYE.
Public Service Loan Forgiveness
This program is for people with federal student loans who work in a wide range of public service jobs, including jobs in government and nonprofit 501(c)(3) organizations. If you work in public service and have reduced loan payments through IBR, your remaining balance after 10 years in a public service job could be canceled if you made loan payments for each month of those 10 years.
The Public Service Loan Forgiveness Program is available only if you have Federal Direct Loans and you make 120 monthly payments under the Direct Loan Program. If you have FFEL loans, you may be eligible to consolidate them into the Direct Loan Program to take advantage of the Public Service Loan Forgiveness Program. However, only the payments made while in the Direct Loan Program will count toward the required 120 monthly payments.
On Oct. 6, 2021, the U.S. Department of Education (ED) announced a temporary period during which borrowers may receive credit for payments that previously did not qualify for PSLF or TEPSLF. Learn more about this limited PSLF waiver.
For more information about this program, review the Department of Education's Public Service Loan Forgiveness Program webpage.
Other Income-Based Repayment plans are available for federal loans. For more information, visit the Department of Education's Federal Student Aid site.