Student Loan Holders: Are You Aware of Federal Income Based Repayment Programs?
May 10th, 2010 @ 5:24 AM by Debbie Dragon
It is that time of year, college graduation time. Students across the country are being handed their diplomas. While it is a time of great accomplishment, it is also a time to start thinking about paying back the student loan debt that you have accumulated during your college years. What many student loan holders do not realize is that there are programs available to help ease the burden of paying back student loan debt. This year’s grads as well as other student loan holders can qualify.
The Federal income based repayment program was updated last July to help those struggling to repay their student loan debt. To date, the word of this program has not gotten out and many loan holders have remained unaware of their options.
The program looks at your income to determine what your monthly payment will be. It caps the amount you need to pay each month at 15% of your discretionary income. Furthermore, after 25 years of making payments your remaining debt including principal and interest will be forgiven. If you work in a public service position, your debt will be forgiven after just 10 years of payments.
Individuals with high debt and below poverty level income may be eligible to pay even less. There is a sliding scale built into the current program. If for example your income is under 150% of the poverty line in relation to the size of your family you would not have to make any monthly payments until your situation changes.
Recently, Congress passed legislation that will expand this program in the near future, making it even easier for upcoming college students to pay back their loans once they graduate. Federal loans issued starting in July of 2014 will have payments capped at 10% of the borrower’s discretionary income and be forgiven after just 20 years.
Graduate and undergraduate loans are both eligible for this program; your loan just needs to be a federal backed student loan. Loans that do not qualify include private loans and PLUS loans that are federal loans for parents of college students. If you have consolidated your student loans you most likely will be eligible.
The problem with the program is that many people who do qualify for the reduced payments are unaware the program even exists. “We’ve been pulling our hair out because not enough people know about these programs,” says Philip G. Schrag, director of Georgetown Law’s Center for Applied Legal Studies, who has written extensively about student loans.
Colleges and Universities across the country are working hard to spread the word. In a time of a troubled economy this is real relief that student loan holders can cash in on.
Debbie Dragon is a full time freelance writer and the co-owner of ReliableWriters.com.
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