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Grads to Get a Break on Student Loan Payments
Featured Author:
Mark Kantrowitz
As a nationally recognized financial aid expert and publisher of FinAid.org, Mark has been called to testify before Congress about student aid on several occasions.
He is interviewed regularly by major news outlets, from the Wall Street Journal, New York Times, USA Today, to MSN, CNN, NBC, ABC, CBS, CNBC.
Mark is the author of four books, including two about student aid. His most recent book, FastWeb College Gold, was published by Harper Collins in September 2006 and is a step-by-step guide to paying for college.He is also on the editorial board of the Council on Law in Higher Education, a member of the board of directors of the National Scholarship Providers Association and a member of the board of trustees of the Center for Excellence in Education.
Mark holds a PhD in computer science from Carnegie Mellon University (CMU) and holds Bachelor of Science degrees in mathematics and philosophy from MIT and a Master of Science degree in computer science from CMU.
More articles from this author:
Mark Kantrowitz / Publisher of FinAid and FastWeb
May 26, 2009
If you’re struggling to make your monthly student loan payments on your measly first-job salary, you’re not alone. The good news is, the government is taking notice — and changing the game to make sure monthly payments don’t cripple college grads.
Even better, whatever you haven’t paid off after 25 years may be forgiven.
With this new option, instead of calculating monthly payments on the total amount a borrower owes, payments will be based on a percentage of the graduate’s discretionary income. It’s called Income-Based Repayment (IBR), it’s available for federally-guaranteed student loans and direct student loans, and it starts July 1, 2009.
If you’re looking for the lowest monthly payment for low and moderate-income borrowers, you’ve found it.
Payments Based on Income, Not Debt
Income-based repayment is similar to “income-contingent repayment” (ICR), but with some key differences.
• First and foremost, IBR is available to more grads. Income-contingent repayment is only available to borrowers in the direct loan program, while income-based repayment is available in both
the federally-guaranteed student loan program and the direct loan
program.
• IBR uses a smaller percentage of discretionary income and a smaller definition of
discretionary income — that means they’re taking a smaller chunk out of the cash you have left over after your other bills are paid. In fact, IBR payments will be as much as 30% to 50% lower than ICR payments.
• Borrowers do not have to consolidate their loans to get access to
this plan.
With IBR, you won’t have to shell out any more than 15% of your discretionary income in loan payments.*
For example, if a borrower owed $40,000 in federal education loans and made $30,000 a year, they’d wind up making the following monthly payments under the different repayment plans:
• $171.94 a month with an IBR plan
• $277.63 a month under an extended 25-year repayment plan
• $319.50 a month under income-contingent repayment
• $460.32 a month under standard 10-year repayment plan
Under IBR plans, monthly payments are adjusted annually, based on the prior year’s federal income tax returns and any change in the family size. Borrowers can also request mid-year adjustments due to changes in financial circumstances, such as job loss. A borrower who is married to a spouse with high income can file as married filing separate in order to have the monthly payments based on only the borrower’s income instead of the combined income.
*Discretionary income is defined as the difference between adjusted gross income (AGI) and 150% of the poverty line for the family size. The example above is based on a single borrower who has $40,000 in federal education loans and an AGI of $30,000 a year, taking into account that the 2009 poverty line in the continental US is $10,830 (plus $3,740 for each additional family member), and 150% of that is $16,245.
adinar19
3 months ago
ok what?
AnneC236
4 months ago
So what if you have no income? What happens then? It is so frustrating to have a degree in a field from which all funding has been pulled. I can't even get a regular job the economy is so bad here.
ChazO4
4 months ago
Everyone look at dis. All college students should be able to choose a payment method from their loan after they've finished college
AliciaT388
4 months ago
Is this for everyone that has student loans?
SherwinjohnM
4 months ago
can i avail it even though I'm not a american citizen
mseveri
4 months ago
When is this plan available until?
ChristinaM750
4 months ago
I am the first to go to college in my family..Ijust graduated high school and want to be a Doctor. it has been my dream to help others. It would mean so much to my parents if i made my dream come true. Last year in may my uncle had died. None of the doctors knew what his cause of death was and it would mean a great deal if by some chance i could figure this out. I know you get many letters asking to go to college but to me going to college would mean the world to me. so please get back to me about college thank yo so much!!!
GeorgeL59
4 months ago
Am looking for scholarships for college to Datar Star College- course Diploma in IT ( Information Technology )
cr881online
4 months ago
This is very exciting news! I have about $40,000 in student loan debt and the monthly payments are out of control.
kfritts1
4 months ago
I have student loans from '93-'94. I have had to defer, postpone, ect. basically since I graduated. I have an Associates Degree. My loan, on the current payment plan will total 2.5 times the original loan. For a variety of reasons, I was never able to make enough money(single parent, 2 sons) to pay the debt w/any frequency. Although my circumstances are somewhat better, I now have medical issues that make it very, very tough to keep a job. I could apply for assistance, however, I wouldn't be approved, at least initially, and I don't want to go through the red tape circus that is necessary. Anyway, is anyone aware of any source that might be able to help me w/this issue? It would be great to have it forgiven, but that won't happen. I would just like to perhaps renegotiate the amount to be paid and the interest rate. Mine is fixed and was set in 1993. Any woeds of wisdom?
professional_woman
5 months ago
I also want to know where to get this help at? Where does a person go to lower their payments of the loan? The Loan Company or who? I have a Associate's Degree and no job need to find help now with the job market and also my loans that I have accumulated throughout the years? Thanks.
dwfpowerst
5 months ago
I have student loans but I am currently unemployed. I was displaced when the company downsized. now they want me to pay the same amount every month does anyone have the 800 # where I can get the payment lowered?
miranova1
5 months ago
fyi
ChristopherW146
5 months ago
Check this out!
JJ45
5 months ago
I think every student should look into this before or after they've made a decision to either take out a loan or even if they know some one who has this problem.