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What does it mean to have a $0 payment and what happens to the interest?

Started by alimay14, April 06, 2017, 10:12:55 am

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Hello all,

I have a few questions.

1. I have qualified for a $0 payment for my $33,935.27 student loans and 10 year repayment plan. What does this actually mean? Since I have qualified for this, does it mean after 10 years my loans will be paid off/forgiven?

2. What about the interest that is accruing on the principle amount?

3. Can I still make payments on the loans without getting knocked off of the $0 payment plan?

This is all so confusing, thank you in advance for any advice you can give!


Hi there,

1. What do you mean you've "qualified". Federal student loan repayment plans have very set requirements - income being the biggest. The only 10 year repayment plan is the Standard Plan, and it is equal payments for 10 years (no forgiveness - you pay off the loan, so your payment couldn't be $0).

There is a program called Public Service Loan Forgiveness (PSLF) which provides forgiveness in 10 years if you meet certain criteria. Learn more here: https://thecollegeinvestor.com/578/ways-to-get-student-loan-forgiveness/

2. Couldn't tell you, because what you said in #1 didn't make sense. If you're talking about PSLF, everything is forgiven (tax free, currently)

3. Once again, I have no idea what plan you're talking about because it doesn't make sense what you said in #1


My student loan payment is now $0 a month because I called to defer and they had me fill out the paperwork for the Income-based plan. Does this help?


Deferment doesn't mean your payment is $0 per month. It means you have a payment amount (whatever it current is) and you're allowed to skip it. However, as a result, your loan balance will continue to grow.

IBR is a great program. However, IBR for new loans is a 20 year repayment term. IBR for older loans (before 2014), is 25 years. You make payments based on your income every year, at at 25 years, any remaining balance is forgiven.

If your payment amount doesn't cover interest, that just continues to accrue. So a $0 payment will see your loan continue to grow. But remember, you get forgiveness after 20 or 25 years.

Now, here's the catch - currently any debt forgiven under this program is considered taxable income. So, you could face a large tax bill down the road. In other words, if you can afford to make an extra payment - don't. Save the money. You might/will need it.