If you’re among the hundreds of thousands of recent college graduates with significant student debt hanging over your now degree-laden head, good news: A new program called Income-Based Repayment may help you tame the debt monster.
What is Income-Based Repayment (IBR)?
IBR is a program introduced by the government in 2007; however, its full effects don’t start until July 1st – which is perfect if you’re a recent grad. Essentially, the program was designed to make sure that graduates who aren’t making the big bucks right after graduation aren’t spending all their earnings on repaying student loans.
IBR can help with people who meet the following criteria:
- Have loans (to students, not their parents) from either the Direct or Guaranteed (FFEL) loan programs or (most) government-funded loans
- Have enough debt to qualify. Specifically, have debt that would require you to spend more than 15 percent of your income in excess of 150% of the poverty level to pay off your loans in ten years – calculator available here
Interest Rates for Adjusted Loans
While the IBR program may make your monthly payments more affordable, it could also mean that your monthly payments don’t cover your full interest rates. This means that:
- For federally subsidized loans, the government would pay the remaining interest for the first three years
- For non-subsidized loans, the unpaid interest would be tacked onto the principal amount you owe
The second option may mean you end up paying more in the long term, but if your earnings increase over the years, this likely won’t be too big a problem. Plus, the IBR program has the unique caveat that any amount still due after 25 years is forgiven.
What is Public Service Loan Forgiveness?
It’s the other loan forgiveness program taking full effect this month, and it’s designed to help those who work in certain so-called public service jobs, including those for the government and nonprofit 501(c)(3) organizations.
If your job qualifies under this program, your loans may be forgiven in full after 10 years of work (during which time you make normal loan payments). And, if your salary qualifies you for IBR loan payments while you’re working, you can still use that program to make payments more affordable.
To find out whether your employment situation may qualify you for help with student loans, visit this website http://www.ibrinfo.org/index.php.
Tags: student loans
This entry was posted on Thursday, July 2nd, 2009 at 1:55 pm and is filed under Financial Literacy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
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