Summer’s Biggest Payback

A new student loan repayment program comes just in time for the fall.

By: Stacey Tisdale | Posted: August 12, 2009 at 6:23 AM

SHAWN THEW/AFP/Getty Images

Loan Repayment Program for Students

A new student loan repayment program comes just in time for the fall.

stacey.tisdale

A new student loan repayment program comes just in time for the fall.

08/12/2009 06:23

Sorry, nobody’s cutting down your $20,000+ school loan, but under the new income-based repayment program, you can substantially reduce your monthly payments.

A single borrower earning $30,000 a year with $40,000 in federal education loans would pay $171.94 per month in an income-based plan versus $319.50 under an income-contingent repayment plan, according to Finaid.org’s loan payment calculator.

The income-based program caps monthly payments at 15 percent of discretionary income, which is based on income, family size and federal poverty guidelines. This applies to single borrowers earning less than $50,000 and to married borrowers with two children who earn less than $100,000.

Income-based repayment plans, part of the College Cost Reduction and Access Act of 2007, won’t replace income-sensitive and income-contingent repayment plans. Income-based repayment plans don’t have a minimum monthly payment, and the 15 percent monthly cap on payments is lower than the 20 percent cap on an income-contingent repayment plan. The government pays the interest for the first three years and the maximum repayment period is 25 years. After that, any remaining debt will be discharged and treated like taxable income.

Income-based repayment is available to participants in the Direct Loan program and the federally guaranteed student loan program. But they are not available for private student loans, Parent PLUS loans or consolidation loans. Income-contingent repayment is only available in the Direct Loan program.

If you’re considering making the switch to income-based repayment, pay attention to the term on your loan. A 25-year loan under an income-based plan can still cost more than a 10-year loan under a different plan.

To apply for income-based repayment plans, contact your lender. Maybe you are among the estimated 1 million borrowers that will get some much needed relief in an economy that’s not giving breaks to those who desperately need them.

Stacey Tisdale is a regular contributor to The Root.

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7 Comments

اسلوب منتديات اسلوب مدونة

eslob

Posted: Sunday, October 04, 2009

Stafford Loan Forgiveness/Teachers

Viking47

Google/Bing Stafford Loan Forgiveness Program

Posted: Monday, August 17, 2009

Public Service Loan Forgiveness

jrmcarter

Where can I find information regarding this option. Both my degrees (undergrad/grad) are in Human Services. I am sure there is some way I can work off some of these loans.
Looking forward to hearing from anyone with viable information.

Posted: Friday, August 14, 2009

@Stacy Tisdale

misterb

Thank you Thank you Thank you for an informative article that is very useful to all of us that took out those horrendous student loans. I didnt even need one when I graduated from undergrad... I took them out for grad school but never finished But after reading your article I researched the situation from the information you provided.The last time I heard, Salley Mae had been consolidating loans for the Dept of Ed and then they got out of the Business. Thanks to you I found out that consolidation was still going on and it makes me very hopeful.

Posted: Thursday, August 13, 2009

دردشة | شات | دردشه | شات

t7b.com

Posted: Wednesday, August 12, 2009

Ought to be expanded

viva_che

Loan forgiveness programs ought to be expanded. So much could be done if we didn't have to fight for every inch of social progress. One of the greatest investments we can make as a nation and with a phenomenal ROI is plowing money into higher education. Why don't we do more of it?

Posted: Wednesday, August 12, 2009

Public Service Loan Forgiveness

natd

Don't forget about the Public Service Loan forgiveness option that will take those 25 years of payments down to 10!

Posted: Tuesday, August 11, 2009

Summer’s Biggest Payback

A new student loan repayment program comes just in time for the fall.

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Summer’s Biggest Payback

A new student loan repayment program comes just in time for the fall.

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