Student Loan Forgiveness & Repayment Plans: The 2025 Guide for Kentucky Borrowers

Navigating your student loans in 2025 has never been more important for Kentucky residents. With federal and state-level updates rolling out, borrowers must stay informed about the latest loan forgiveness programs, new repayment options like the SAVE Plan, and eligibility requirements to maximize debt relief.

1. Overview: Federal Student Loan Changes in 2025

The Biden administration and Congress have enacted substantial updates for federal student loan borrowers in 2025:

• SAVE Plan (Saving on a Valuable Education) — Now fully implemented, with new benefits for low- and moderate-income borrowers.
• Expanded PSLF — Public Service Loan Forgiveness rules continue to allow for broader eligibility and streamlined processes.
• Forgiveness for Borrower Defense, Closed Schools, and Disabilities — Updated criteria and application methods offer additional relief opportunities.

2. 2025 Update: The SAVE Plan (Saving on a Valuable Education)

The SAVE Plan is the most generous income-driven repayment plan so far. Here’s what Kentucky students need to know:

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Test Your Expertise: The Complexities of the 1031 Exchange

As a sophisticated real estate investor, you understand that the 1031 Exchange is a cornerstone strategy for tax deferral and wealth accumulation. But beyond the basics, the intricacies of the 1031 Exchange rules can pose significant challenges. This quiz is designed to test your in-depth knowledge and highlight critical nuances that separate casual investors from true experts in 1031 Exchange transactions.

Instructions: Choose the best answer for each question.

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Question 1: Understanding "Like-Kind" in a 1031 Exchange

Which of the following scenarios most likely qualifies as a like-kind property exchange under IRS Section 1031, allowing for 1031 Exchange tax deferral?

a) An investor exchanges a portfolio of publicly traded REIT stocks for a commercial retail building. b) An investor exchanges their primary residence, used for personal living for 15 years, for a duplex intended for rental income. c) An investor exchanges raw land held for appreciation in Texas for a stabilized apartment complex in Florida, both held for investment. d) An investor exchanges a classic car collection (personal property) for a single-family rental home (real property).

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Question 2: Navigating the 45-Day Identification Period for a 1031 Exchange

An investor sells a multi-family property on June 15th for a 1031 Exchange. According to the strict timelines, by what date must they identify their replacement properties to comply with the 1031 Exchange requirements?

a) July 30th of the same year, as the 45-day period includes weekends and holidays. b) August 29th of the same year, allowing for an extra 45 days if needed. c) December 12th of the same year, aligning with the 180-day completion period. d) January 1st of the following year, if they plan to file for an extension.

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Question 3: The Role of a Qualified Intermediary (QI) in a 1031 Exchange

Why is the engagement of a Qualified Intermediary (QI) absolutely critical for the validity of a 1031 Exchange?

a) The QI provides investment advice and helps the investor choose the best replacement property for their 1031 Exchange strategy. b) The QI acts as a liaison with the IRS, directly negotiating tax liabilities related to the 1031 Exchange process. c) The QI holds the proceeds from the relinquished property's sale, preventing the investor from having "constructive receipt" of funds, which would invalidate the 1031 Exchange. d) The QI provides legal and tax advice to ensure the 1031 Exchange is perfectly compliant

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Question 4: Understanding "Boot" and its Impact on a 1031 Exchange

An investor sells a commercial building with $500,000 in equity for a 1031 Exchange. They purchase a replacement property for $450,000, effectively reducing their debt by $50,000. What is the tax implication of this scenario within the 1031 Exchange framework?

a) The entire 1031 Exchange is disqualified because the investor "traded down" in value. b) The $50,000 in reduced debt is considered "boot" and will be immediately taxable as partial gain in this 1031 Exchange. c) There are no immediate tax implications, as the primary goal of the 1031 Exchange is only about the "like-kind" nature of the properties. d) The investor can defer the $50,000 as long as they pay off other personal debts with the funds, still qualifying for a full 1031 Exchange.

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Question 5: Advanced 1031 Exchange Strategies & Flexibility

An investor aims to sell a highly appreciated single-tenant retail property and replace it with multiple smaller, diversified multi-family units to spread risk. Which of the following 1031 Exchange identification rules best allows for this diversification strategy, maintaining eligibility for a 1031 Exchange?

a) The "Three Property Rule," where the investor can identify up to three properties of any value, regardless of the relinquished property's value, for their 1031 Exchange. b) The "200% Rule," allowing identification of any number of properties, provided their aggregate fair market value does not exceed 200% of the relinquished property's value for the 1031 Exchange. c) The "95% Rule," which states that if more than three properties are identified, the investor must acquire at least 95% of the aggregate value of all identified properties to qualify for the 1031 Exchange. d) All of the above are valid identification rules within a 1031 Exchange, offering flexibility for various investment strategies.

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The Ultimate DSCR Loan for Rental Property Quiz

Are you looking to expand your real estate investment portfolio? A DSCR loan might be the perfect tool to help you achieve your goals without relying on traditional income documentation. Test your knowledge with this quiz to see if you're ready to master the intricacies of a DSCR loan for rental property.

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Page 1 of 5

What is the primary factor a lender considers when approving a DSCR loan for rental property? A) The borrower's personal income and debt-to-income (DTI) ratio. B) The borrower's credit score and employment history. C) The property's potential rental income compared to its monthly expenses, known as the Debt Service Coverage Ratio. This is the key metric for a DSCR loan for rental property eligibility and approval. D) The total value of the borrower's existing investment properties and personal savings.

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How does a DSCR loan for a rental property differ from a conventional mortgage for a personal residence? A) A conventional mortgage requires a DSCR calculation, whereas a DSCR loan for a rental property does not. B) A DSCR loan for a rental property primarily focuses on the property's cash flow, allowing investors to qualify without traditional income verification, unlike a conventional mortgage which is based on personal income and liabilities. C) A conventional mortgage has a higher interest rate and stricter requirements than a DSCR loan for a rental property. D) A DSCR loan for a rental property is only available for commercial properties, not residential rental properties.

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What is an ideal Debt Service Coverage Ratio (DSCR) for a lender when evaluating a DSCR loan for a rental property? A) A DSCR of 0.75, indicating the property generates 75% of the income needed to cover its debt service. B) A DSCR of 1.00, meaning the property's income exactly equals its debt service. C) A DSCR of 1.25 or higher, as this indicates the property's income is greater than its expenses, making it a strong candidate for a DSCR loan for a rental property and providing a buffer for unexpected costs. D) A DSCR of 2.00, which is the standard minimum for all investment properties, regardless of location or market conditions.

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Which of the following expenses are typically included in the calculation of the Debt Service Coverage Ratio for a DSCR loan for a rental property? A) The property's mortgage payment (principal and interest), property taxes, and insurance, which are the core components used to determine if the property can support the debt. B) The property's mortgage payment, property taxes, insurance, and the borrower's personal credit card debt. C) The property's monthly rental income and all utility bills, regardless of who pays them. D) Only the principal and interest payment of the loan, as other expenses are not considered in a DSCR loan for a rental property calculation.

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Who would most benefit from using a DSCR loan for a rental property? A) A first-time homebuyer with a W-2 salary and a high debt-to-income ratio, who is looking to purchase a primary residence. B) A seasoned real estate investor with multiple properties who wants to expand their portfolio without using personal income to qualify, making a DSCR loan for a rental property the ideal financing solution for their needs. C) Someone looking to finance a primary residence with a low down payment and a government-backed loan. D) An individual with a very low credit score who cannot qualify for any other type of loan.

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• Payment Amounts: Undergraduate loans: 5% of discretionary income. Graduate/professional loans: 10%. Mixed: weighted average.
• Discretionary Income Change: Income shielded from payments increased to 225% of the poverty line. For a single resident, that’s about $32,805/year in 2025.
• Interest Relief: Any unpaid monthly interest that is not covered by your payment is forgiven, so your loan balance will not grow if you make your payments.
• Earlier Forgiveness: If your original undergraduate loan is $12,000 or less, forgiveness arrives after 10 years of payments (one additional year per $1,000 above that amount; grad/professional loans max at 20–25 years).

How to Apply for the SAVE Plan in Kentucky

1. Log into studentaid.gov/idr/
2. Use your FSA ID to access the Income-Driven Repayment application.
3. Submit income documentation (tax returns or pay stubs).
4. Select “SAVE Plan” as your preferred repayment option.
5. Review and confirm your information; your servicer will process the request.

Tip: Re-certify your income each year to maintain eligibility and receive the lowest payments.

Success Story: SAVE Plan in Action

Jordan from Lexington: Borrowed $35,000 for undergrad at UK. Income: $40,000/year. Under the SAVE Plan, Jordan’s monthly payment drops from 0 (Standard) to , with interest not piling up. Projected forgiveness in 18 years, with over $19,000 expected to be discharged tax-free under current rules.

3. Public Service Loan Forgiveness (PSLF) Enhancements

✅ Small Business Resources 

• SBA – Small Business Administration
  https://www.sba.gov

• SCORE Mentors (Free Mentoring & Workshops)
  https://www.score.org
• Small Business Development Centers (SBDC)
  https://americassbdc.org

Are You an SBA Real Estate Loan Expert?

Test your in-depth knowledge on using SBA Loans for owner-occupied commercial Real Estate acquisition. These questions delve into the critical details that can impact your business's growth and financial strategy.

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Page 1 of 5

For an existing commercial property, what is the minimum owner-occupancy percentage required for an SBA 7(a) real estate loan, and does this specific scenario qualify?

A manufacturing company plans to acquire a 30,000 sq ft industrial real estate facility using an SBA 7(a) Loan. The company initially needs 18,000 sq ft for its operations and intends to lease out the remaining 12,000 sq ft.

A) 60%; Yes, it qualifies. B) 51%; Yes, it qualifies. C) 75%; No, it does not qualify. D) 60%; No, it does not qualify, as they are leasing out a portion.

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Which of the following sets most accurately represents additional cost categories that can typically be financed within an SBA 504 Loan for a commercial real estate project?

Hint: Beyond the straightforward purchase of a commercial real estate property, an SBA 504 Loan is highly effective for comprehensive projects.

A) Business inventory, working capital, and employee salaries. B) Building renovations, long-term machinery essential to operations within the property, and soft costs like architectural fees. C) Advertising expenses, short-term equipment leases, and utility deposits. D) Personal real estate investments, vehicles for personal use, and stock market investments.

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Between an SBA 7(a) Loan and an SBA 504 Loan, which program generally offers the lowest typical borrower down payment for a commercial real estate acquisition, and what is that common minimum percentage for established businesses?

A highly profitable professional services firm in a competitive market wants to purchase its office real estate with minimal upfront capital. The firm's owners prioritize cash flow and liquidity.

A) SBA 7(a) Loan; 15% B) SBA 504 Loan; 10% C) SBA 7(a) Loan; 5% D) SBA 504 Loan; 20%

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For new construction, what is the initial minimum owner-occupancy percentage required, and what is the maximum timeframe to meet the full owner-occupancy threshold, for an SBA Real Estate Loan?

A fast-growing tech startup plans to construct a new 50,000 sq ft headquarters using an SBA Loan. They will immediately occupy 35,000 sq ft and have a definitive plan to occupy the remaining 15,000 sq ft within two years as their team expands.

A) Initial 51%, full 80% within 5 years. B) Initial 60%, full 80% within 3 years. C) Initial 75%, full 100% within 1 year. D) Initial 51%, full 100% within 2 years.

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What is this crucial requirement, and what fundamental principle does it underscore for the lender?

When securing an SBA Loan for a commercial real estate purchase, principal owners with a 20% or greater ownership stake are almost universally required to provide a specific type of assurance beyond the collateral of the real estate itself.

A) A fixed-rate interest payment commitment, demonstrating long-term stability. B) A first-lien position on all personal assets, ensuring full recovery. C) A personal guarantee, signifying the owners' personal commitment to loan repayment. D) A business plan with projected revenue growth of at least 15% annually, showing future viability.

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PSLF remains a top option for Kentuckians who work full-time for government, public education, or certified nonprofits.

• 120 qualifying payments (10 years) on Direct Loans while working for an eligible employer result in full loan forgiveness.
• 2025 Updates:
  • One-Time PSLF Count Adjustment — Many pre-2010 and FFEL loans can now be consolidated for retroactive credit, with a March 2025 deadline.
  • Streamlined Application: The PSLF Help Tool and new digital employer verification make tracking easier than ever.

Kentucky PSLF Employers Include:

• Commonwealth of Kentucky (state agencies)
• Public K-12 schools (Jefferson County Public Schools, Fayette County Public Schools, etc.)
• Major hospitals (UK Healthcare, Baptist Health, Norton Healthcare)
• Nonprofits registered under Section 501(c)(3)

PSLF Application Steps (2025)

1. Consolidate non-Direct loans if necessary through studentaid.gov
2. Submit the PSLF Form annually or whenever you change employers.
3. Maintain qualifying payments under an income-driven repayment plan (SAVE, PAYE, REPAYE, IBR, or ICR).
4. After 120 payments, submit a final PSLF application for forgiveness.

Success Story: PSLF in Kentucky

✅ Real Estate Investor Resources

• AirDNA (Short-Term Rental Data)
  https://www.airdna.co

• Rentometer (Rent Comps)
  https://www.rentometer.com
• Zillow Research & Data
  https://www.zillow.com/research

DSCR Loan IQ Quiz!

Test your knowledge of Debt Service Coverage Ratio (DSCR) loans!

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Page 1 of 3

What is the primary factor a lender focuses on when approving a DSCR loan for an investment property? a) The borrower's personal debt-to-income (DTI) ratio b) The property's ability to generate enough income to cover its mortgage payments c) The borrower's credit score history over the past 10 years d) The total number of investment properties the borrower already owns

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If a property has a Net Operating Income (NOI) of $5,000 per month and its total monthly debt service (PITI) is $4,000, what is its DSCR? a) 0.8x b) 1.0x c) 1.25x d) 5.0x

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Which type of borrower most commonly benefits from using a DSCR loan? a) First-time homebuyers purchasing a primary residence b) Investors with a strong W-2 income and minimal tax deductions c) Self-employed individuals or those with complex income who want to avoid traditional income verification d) Homeowners looking to refinance their primary residence for a lower interest rate

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Emily J., Louisville nurse: Owed $90,000 after graduate school. Made 10 years of payments averaging $210/month on an IDR plan. In 2025, her remaining $56,000 was forgiven tax-free after new PSLF rules streamlined her final submission.

4. Income-Driven Repayment (IDR) Plan Options in 2025

Apart from SAVE, borrowers may also use these IDR plans:

• Pay As You Earn (PAYE)
• Income-Based Repayment (IBR)
• Income-Contingent Repayment (ICR)
• Older plans like REPAYE have been transitioned into SAVE or closed to new applicants.

Key points: Payments set at 10–20% of discretionary income; forgiveness after 20–25 years. Consider IDR plans if you carry both federal and Parent PLUS loans (only ICR eligible for Parent PLUS via consolidation).

How IDR Plans Help Kentucky Borrowers

• Lower monthly out-of-pocket costs
• Protection from delinquency and default
• Potential for forgiveness after 20–25 years (tax treatment depends on federal rules in effect when forgiven)

5. Teacher Loan Forgiveness Program for Kentucky Educators

Teachers in Kentucky schools serving low-income students may qualify for substantial loan relief:

• Up to $5,000 forgiven after five years of teaching (all subjects)
• Up to $17,500 for teachers in math, science, or special education roles
• This program can be combined with PSLF — you may be able to receive both with careful planning

Application Process for Teacher Loan Forgiveness

1. Teach full-time for five years in a qualifying school or educational service agency
2. Complete the Teacher Loan Forgiveness Application
3. Have your school’s chief administrative officer certify your employment
4. Submit the application to your loan servicer after your fifth year is complete

Success Story: Kentucky Teacher Forgiveness

Darius, middle school teacher in Bowling Green, had $49,000 in federal loans. After five years teaching special education, $17,500 was forgiven, and he continued on PSLF for the remaining balance.

6. State-Specific Loan Assistance for Kentucky Residents

Kentucky also offers local programs to supplement federal relief:

• Kentucky’s Best in Class Loan Forgiveness Program — Targeted at new teachers who commit to working in critical shortage areas. Offers between $3,000–$6,000 per year (eligibility rotates).
• Kentucky Student Loan Repayment Assistance for Health Professionals — Provided by the Kentucky Primary Care Office for physicians, nurse practitioners, and dentists working in medically underserved areas. Awards range from $20,000–$50,000 depending on specialty and service term.
• John R. Justice Student Loan Repayment Program — For public defenders and prosecutors; awards up to $10,000/year, renewable, subject to funding.

Applying for State Programs

• Review eligibility and open application windows on program websites (see Kentucky’s CPE and KHEAA sites).
• Prepare proof of service commitment and employment verification.
• Submit necessary applications along with federal loan documentation.

7. 2025 Policy & Guidance: Common Borrower Issues

• Defaulted Loans: 2025’s “Fresh Start” program remains open, allowing defaulted borrowers to return to good standing and access forgiveness options.
• Older FFEL or Perkins Loans: Must be consolidated into Direct Loans to qualify for most forgiveness plans.
• Spousal borrowers: New options to separate spousal consolidation loans opened in late 2024; check with your servicer or call Federal Student Aid for help.
• Managing Tax Implications: Forgiveness under PSLF and Teacher Loan Forgiveness is not taxable through 2025; check future regulations for IDR forgiveness.

8. Action Steps for Kentucky Borrowers

1. Log in to studentaid.gov and review your Federal Loan Dashboard.
2. Confirm your employment and loan types for PSLF or Teacher programs.
3. Apply for IDR or the SAVE Plan to minimize monthly payments.
4. Track program deadlines, especially for PSLF credit adjustment (through March 2025).
5. For state programs, visit KHEAA and CPE to learn about grants and loan forgiveness for Kentucky professionals.

9. More Resources & Personalized Help

• Federal Student Loan Support: 1-800-4-FEDAID (1-800-433-3243)
• Kentucky Student Aid: KHEAA
• Loan Simulator Tools: studentaid.gov/loan-simulator/

Don’t let confusion cost you thousands. Take action with these 2025 programs, and reach out to Kentucky’s trusted student aid agencies for free assistance.

Get a No Obligation Quote Today.

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