Hi there,

I am a veterinarian (graduated in 2012) in private practice with $183,000 in federal direct loans.  I have been on IBR (3 yrs) and am currently switching to PAYE.  I have been seriously considering going into public service/teaching and am wondering…. 

Is the accrued interest forgiven in addition to the principle or just the principle loan after 120 payments with PSLF?  And no income taxes are expected to be paid on that amount correct?

Thank you thank you!

The Dept. of Treasury letter to Sander Levin clarifies that PSLF and the Teacher loan forgiveness are tax free. The letter also states that PSLF forgives the principal and all of the interest accrued. The IBRinfo website points to this letter as evidence for tax free forgiveness. I’m no expert, but that’s what I found with a quick google search

Would you be eligible for PAYE? The guidelines say that you have to have a loan dispersed after October 2011 to qualify….and be a new borrower as of 2007…. wish I were eligible!

Thank you for that info!  It does look like I qualify for PAYE and my servicer (Great Lakes) said I am eligible.  I started vet school in 2008 and had my last loan disbursement after October 2011.

The problem I just ran in to is that it looks like my accrued interest (over $11,500) will capitalize when I transition to PAYE.  Has anyone else heard of this?  I am wondering,  is still worth it to switch plans?