Do Zero Dollar Payments Count Toward Loan Forgiveness?

Navigating federal student loan repayment presents various questions for borrowers, particularly concerning how different payment amounts contribute to loan forgiveness. A common question is whether a $0 monthly payment, often associated with certain repayment strategies, counts toward student loan forgiveness. Understanding these conditions is important for borrowers planning their financial future and aiming for loan relief.

Understanding Income-Driven Repayment Plans

Federal student loan borrowers have access to Income-Driven Repayment (IDR) plans, which are designed to make monthly payments more affordable by basing them on a borrower’s income and family size. These plans adjust the payment amount to a percentage of discretionary income, ensuring that payments are manageable, especially during periods of low earnings. The primary types of IDR plans include Income-Based Repayment (IBR), Pay As You Earn (PAYE), Income-Contingent Repayment (ICR), and the Saving on a Valuable Education (SAVE) plan, which replaced the Revised Pay As You Earn (REPAYE) plan. The calculation of discretionary income involves a borrower’s adjusted gross income (AGI) and a percentage of the federal poverty level for their household size.

Depending on a borrower’s income and family size relative to their outstanding loan balance, the calculated monthly payment under an IDR plan can sometimes be as low as $0. This zero-dollar payment status allows borrowers to fulfill their repayment obligations without a financial burden during times of economic hardship.

Counting Qualifying Payments

$0 payments made under an Income-Driven Repayment (IDR) plan generally count as qualifying payments towards federal student loan forgiveness. This applies to both Public Service Loan Forgiveness (PSLF) and forgiveness under IDR plans themselves. For a payment to qualify, it must typically be made on time, for the full amount due (even if that amount is $0), and under a qualifying repayment plan. Payments must also have been made after October 1, 2007, for PSLF purposes, and apply to federal Direct Loans.

Payments made while loans are in deferment or forbearance typically do not count towards forgiveness, unless specific temporary waivers or certain economic hardship or military deferment periods after 2013 are in effect. Similarly, payments made while loans are in default or under non-qualifying plans like the Standard Repayment Plan (unless for PSLF purposes, where the standard 10-year plan can qualify due to its structure, but would likely result in no remaining balance to forgive) do not contribute to forgiveness. Furthermore, a one-time Income-Driven Repayment (IDR) account adjustment is being applied, which can retroactively provide credit for past payments towards forgiveness, including some periods that previously did not count, such as certain deferments and forbearances.

Types of Loan Forgiveness Programs

Two primary federal student loan forgiveness pathways are relevant for borrowers making IDR payments: Public Service Loan Forgiveness (PSLF) and Income-Driven Repayment (IDR) plan forgiveness. Public Service Loan Forgiveness is designed for borrowers employed full-time by qualifying government organizations or 501(c)(3) non-profit organizations. This program requires 120 qualifying monthly payments, which equates to 10 years of payments, after which the remaining federal Direct Loan balance is forgiven tax-free.

Income-Driven Repayment plan forgiveness, conversely, is available to borrowers regardless of their employment type. Under this pathway, any remaining loan balance is typically forgiven after 20 or 25 years of qualifying monthly payments, totaling 240 or 300 payments, respectively. A significant difference between these two forgiveness types lies in their tax implications. While PSLF forgiveness is generally exempt from federal income tax, forgiveness received through IDR plans is currently tax-free only through December 31, 2025, due to the American Rescue Plan Act of 2021. Beginning January 1, 2026, any amount forgiven under an IDR plan will generally be considered taxable income at the federal level, potentially resulting in a tax liability for the borrower.

Tracking Your Forgiveness Progress

Borrowers pursuing student loan forgiveness should proactively monitor their progress to ensure all qualifying payments and employment periods are accurately recorded. The Federal Student Aid website, StudentAid.gov, serves as the central hub for tracking this information. It provides a detailed overview of loan status and payment counts, which is crucial for staying on track.

For those pursuing Public Service Loan Forgiveness (PSLF), regularly submitting the Public Service Loan Forgiveness (PSLF) Employment Certification Form (ECF) is a key step. This form verifies qualifying employment and payments, and it is recommended to submit it annually or whenever changing employers. The PSLF Help Tool, available on StudentAid.gov, assists borrowers in completing and submitting this form, allowing for electronic signatures and direct submission to the Department of Education. For IDR forgiveness, borrowers should keep records of their annual income certifications and payments, which can be viewed through their loan servicer’s website or statements.