Does a borrower on an income-driven repayment plan have to be a full-time employee to qualify for loan forgiveness, or is part-time work also acceptable? If so, does the borrower have to work a minimum number of hours per week to stay eligible for forgiveness? The answer depends on the type of loan forgiveness.
Part-Time Employment Counts for Income-Driven Repayment
The forgiveness after 20 or 25 years in an income-driven repayment plan is based on the number of payments, not employment status. A borrower can qualify for loan forgiveness even if they are employed part-time.
The monthly payment in an income-driven repayment plan is based on a percentage of the borrower’s discretionary income, so part-time employment will yield a lower monthly payment due to lower income.
Full-Time Employment Required for Public Service Loan Forgiveness
Public service loan forgiveness requires full-time employment in a qualifying public service job or a combination of part-time public service jobs that are the equivalent of full-time employment.
Full-time employment is defined as working an annual average of 30 or more hours a week. Vacation time and medical or maternity leave are excluded from the calculation of the annual average.
Do Zero Monthly Loan Payments Count for Forgiveness?
The calculated monthly loan payment will be zero if the borrower’s income is less than 150% or 100% of the poverty line.
- If the borrower’s income is less than 150% of the poverty line, the monthly payment will be zero under income-based repayment, pay-as-you-earn repayment and revised pay-as-you-earn repayment.
- If the borrower’s income is less than 100% of the poverty line, the monthly payment will be zero under income-contingent repayment.
A calculated monthly payment of zero counts as a payment toward the 20- or 25-year forgiveness in income-driven repayment plans and toward public service loan forgiveness.
Months during which the borrower is in an economic hardship deferment count toward the 20- or 25-year forgiveness under an income-driven repayment plan, but not toward the 10-year loan forgiveness under public service loan forgiveness.