The Guide 31
PREPARE APPLY RECEIVE REPAYAre there tax incentives while paying back
Yes. Tax benefits are available for certain higher education
expenses, including a deduction for student loan interest for
certain borrowers. This benefit applies to all loans used to
pay for postsecondary education costs, including PLUS Loans.
The maximum deduction is $2,500 a year. Internal Revenue
Service (IRS) Publication 970, Tax Benefits for Higher
Education, explains these credits and other tax benefits.
You can get more information online at www.irs.gov or
by calling the IRS at 1-800-829-1040. TTY callers can call
Payments are calculated using the fixed interest rate of 6.8 percent for
student borrowers for loans made on or after July 1, 2006.
aThis repayment plan is available to borrowers who have no outstanding
balance on a Direct Loan as of Oct. 7, 1998, or who have obtained a Direct
Loan after Oct. 7, 1998, and have an outstanding balance on Direct Loans
that exceeds $30,000. The amounts were rounded to the nearest dollar and
were calculated based on a 25-year repayment plan.
bThis is an estimated monthly repayment amount for the first two years of
the term and total loan payment. The monthly repayment amount will
generally increase every two years, based on this plan.
cAssumes a 5 percent annual growth (Census Bureau) and amounts were
calculated using the formula requirements in effect during 2006.
dHOH is Head of Household. Assumes a family size of two.
Postponing Loan Repayment
(Deferment and Forbearance)
Under certain circumstances, you can receive periods of deferment
or forbearance that allow you to postpone loan repayment. These
periods don’t count toward the length of time you have to repay
your loan. You can’t get a deferment or forbearance for a loan that
is already in default.*
What is deferment?
A deferment is a period of time during which no payments are
required and interest does not a