Student Loan Forgiveness: What You Need to Know

Why your spouse's income could trip you up.

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Are there any catches to the government's new income-based student loan repayment plan? Sure. Edie Irons, communications director for the nonprofit Project on Student Debt, says fine print in the new law could trip up some debt-burdened grads.

For example, you'll have to be careful to make sure you're applying for the new plan and not the older and less attractive but similar-sounding plans offered by the government and some lenders. The key phrase is "income-based repayment." Forget about "income contingent repayment" and "income-sensitive repayment," Irons says.

Also, if your income is so high that your federal debt payments make up less than 15 percent of your disposable income—even if you have other big bills, such as medical debts or private educational loans—you probably won't qualify for the program.

Plus, because the law currently calls for the government to consider a family's entire income, those with working spouses may have to make higher payments, even if their spouses also have big educational debts.

And anyone hoping for forgiveness on public service loans had better keep excellent records, since under the current law, when the 10 years are up, the burden will be on the student to prove that he or she made all the payments on time and never exceeded the income limits. Irons and her group want Congress to eliminate some of these sticking points. But even as it is, she says, the new plan "will be an enormous help to many thousands of borrowers."

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