Help For Repaying Student Loans
Starting July 1, 2009, the US government’s new Income Based Repayment Plan will help some college graduates get lower student loan payments. The program uses your income and your family size to calculate your monthly payments.
If you have a Graduate PLUS, Stafford or consolidated loan that was made under either the Federal Family Education Loan or the Direct Loan programs you may qualify. However if you have a Parent PLUS loan you likely won’t qualify. Also your debt must be over one and a half times your gross income.
Your monthly payments will be determined by how much you can pay each month, assuming you qualify for Income Based Repayment Plan
Generally, the payments you have to make will be less than 10% of your monthly gross income. If your income is 150% or less than the federal poverty line, it’s possible you won’t have to pay anything until your salary increases.
This program might be particularly useful to you if you are a graduate with a lot of student loans that can’t find a job or a college student that has a high debt to income ratio. People going into public service might also find the program useful. If they are in this plan they may be eligible for the Public Service Loan Forgiveness Program. That program eliminates the debt of some people who have worked in the public sector full-time for 10 years. Student loan debts that remain after 25 years of payments may be forgiven under the Income Based Repayment plan.
Now the bad news. You may end up paying more interest over the life of your loan because a smaller payment usually increases the length of time you have to repay your loan.
If you think you qualify for any of these loans contact your lender. You may be asked for a copy of last year’s tax return or you may have to fill out IRS Form 4506-T so the IRS can send them a transcript of the federal tax return you filed with the IRS. Be sure to let your lender know if you have lost your job or had some sort of financial hardships.