Starting July 1st, some college grads will be making lower loan payments thanks to the government's new Income Based Repayment Plan. This program calculates your monthly payments based on your income and your family size.
You may qualify if you have a Stafford, Graduate PLUS, or consolidation loans made under either the Direct Loan or Federal Family Education Loan programs. You don't qualify if you have a Parent PLUS loan. Your debt must be 1.5 times more than gross income.
You can calculate your eligibility at finaid.org/calculators/ibr.phtml. The loans can be new or old, and for any type of education, including undergraduate, graduate or professional job training.
2. How it works
If you qualify for Income Based Repayment, your monthly payments will be pegged to how much you can afford each month.
Typically your loan payments will be less than 10% of your monthly gross income. If you make 150% or less of the federal poverty line (which is about $16,245 for a single person) you won't pay anything until your salary increases.
So, the people who will really benefit from this program: grads with a lot of student loan debt who can't find jobs, college grads that have a lot of debt compared to income. And people who are going into public service. That's because if you're in this plan, you're eligible for the Public Service Loan Forgiveness Program that wipes out your debt if you've worked full time in the public sector for 10 years. Income Based Repayment also will forgive student-loan debt that remains after 25 years of payments.
But ... there are downsides to this program. You pay more in interest over the life of your loan. A reduced payment in Income Based Repayment usually extends how long you have to pay your loan back.
3. Get started now
Talk to your lender if you think you're a candidate. The lender may ask for a copy of last year's tax return. More likely they will have you complete IRS Form 4506-T to have the IRS send them a tax transcript of your federal income tax return as filed with the IRS says Mark Kantrowitz of finaid.org.
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Monday, July 20, 2009
Monday, July 6, 2009
Student Loans Remind Of College Cost Reduction and Access Act
College Cost Reduction and Access Act was signed into law in 2007. it created a special income based repayment program for student loans to help the college graduates to make their loans manageable.
The Department of Education has gone one step further with a new law that will cap student loans, based on one's adjusted gross income. It is called Income Based Repayment Plan and will go into effect since July 1st of 2009. This new student loans repayment program is a new repayment plan for the major types of federal loans made to students. Under Income Based Repayment plan, "your required monthly payment is capped at an amount that is intended to be affordable based on your income and family size," reads the information on the website of the U.S. Department of Education.
Income Based Repayment plan eligibility requirement is very simple. Any student may enter into this student loan repayment program if his or her federal student loan debt is high relative to your income and family size.
Call it a student loans bailout program, but it is good and encourages education. Here are two more benefits among others. If you repay your student loans under Income Based Repayment Plan for 25 years and still have a balance, the rest of your student loan is canceled. If you work in public service and have reduced loan payments through IBR, your remaining balance after ten years in a public service job could be canceled if you made loan payments for each month of those ten years.
High student loans have saddled the gradutes. They face a very difficult job market in this economy. Therefore programs like College Cost Reduction and Access Act and Income Based Repayment plan are just in time to bailout the student loans. At least this is a better type of bailout as we invest in knowledge and education, not in bonuses.
Source
The Department of Education has gone one step further with a new law that will cap student loans, based on one's adjusted gross income. It is called Income Based Repayment Plan and will go into effect since July 1st of 2009. This new student loans repayment program is a new repayment plan for the major types of federal loans made to students. Under Income Based Repayment plan, "your required monthly payment is capped at an amount that is intended to be affordable based on your income and family size," reads the information on the website of the U.S. Department of Education.
Income Based Repayment plan eligibility requirement is very simple. Any student may enter into this student loan repayment program if his or her federal student loan debt is high relative to your income and family size.
Call it a student loans bailout program, but it is good and encourages education. Here are two more benefits among others. If you repay your student loans under Income Based Repayment Plan for 25 years and still have a balance, the rest of your student loan is canceled. If you work in public service and have reduced loan payments through IBR, your remaining balance after ten years in a public service job could be canceled if you made loan payments for each month of those ten years.
High student loans have saddled the gradutes. They face a very difficult job market in this economy. Therefore programs like College Cost Reduction and Access Act and Income Based Repayment plan are just in time to bailout the student loans. At least this is a better type of bailout as we invest in knowledge and education, not in bonuses.
Source
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