Pay Off Your Student Loan with Help from Uncle Sam
Today could be a day of liberation for millions of college graduates who are struggling with college loan payments. Thanks to the federal government's new Income Based Repayment Plan, which takes effect today, many debtors can cut their payments on their federal student loans to less than 15 percent of their incomes.
The U.S. Department of Education's official site about IBR is a great place to start, but anyone thinking of applying for the program should consider a few details:
Are you married or engaged? Marriage just got more expensive, because the government initially plans to base the new payments on "family income," no matter how much one spouse owes. But Edie Irons, spokeswoman for the Project on Student Debt, says a move is afoot to reduce the marriage penalty sometime next year. In the meantime, she suggests debtors who already are hitched (or plan to wed) see if filing their taxes separately would give them enough debt relief to offset the extra hassle and possible tax expense.
Is there any possibility you will work in any type of public-service job (for any government agency, school, nonprofit, etc.)? If so, consolidate your federal loans directly with the federal government first. Those are the only loans that qualify for public-service forgiveness.
Have you been laid off or had a pay cut? Keep good records. The government plans to base the new loan payments on the income debtors report on their previous year's tax filings. Those who want their payments to be based on current, lower incomes will have to provide documentation. Those who get a new job or a raise should plan on higher payments the following year, as debtors have to reapply for IBR, and document their recent income, every year.
Have you been working in a public-service job and been making your payments for the last year or two? Good news: You might qualify for retroactive credit towards loan forgiveness. Anyone who has worked in a public-service job and been making regular, on-time payments since Oct. 1, 2007, can have those payments counted toward the 120 (or 10 years' worth of) on-time payments that are required for the remainder of the loan to be forgiven under the government's public-service cancellation offer.
Confused by similar-sounding jargon? Watch out. There are several sound-alike programs, including "Income Contingent Repayment" and "Income Sensitive Repayment." Remember: the federal government's Income BASED Repayment is generally considered to be the best deal.
Hoping for more relief? Alas, the new IBR applies only to federal student loans. So, parents who borrowed to pay for their kids' tuition won't get any help from the new program. And students who took private, signature, or alternative loans from companies like Sallie Mae won't be helped by the new program. The federal government and private lenders generally do offer other payment plans to help strapped borrowers, however. So, if you're having trouble making your payments, it pays to call them and ask for help.
See more on Paying for College.
Tags: colleges | student loans | paying for college
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Reader Comments
RE Tina Marie of NY SINGLE MOTHER
In response to Tina Marie of NY :
I am a single mother of three. My husband was a police officer and was shot in the head in the line of duty. He stayed in the hospital for 8 months before dying. Every penny of our life savings, retirement and his life insurance was gone by the end of that year. I was a junior in college working full time in public service AND going to school and raising a family when he was killed. So before you pass judgment on the single mothers take a moment to understand that not ALL of us single mothers spread our legs to dead beats and/or strangers and are now looking for a handout. You know I bet you don't do anything to help your community. Maybe you should offer solutions instead of passing harsh judgments. Obviously people who have educational debts were trying to better themselves. Unfortunatly for my children and myself, when my husband died I was unable to continue with school as I now work 2 full time jobs. Certainly if the government can bailout these large corporations who acted irresponsibly in their spending, then why can't I get a break too? I work my tail off, my children are all honor students and I live paycheck to paycheck. We don't have a fancy house and/or expensive things. I have NO debt except my student loans. Yet I have to tell my children they can't play sports or go to summer camp or take music lessons. I can't even afford school pictures, yearbooks or field trips. Does this seem fair? Education should be free! If the number of educated people were higher than the number of non-educated people, society as a whole would benefit. More education = productive thinking = solutions that work. Why don't you use your spare time for solutions instead of passing judgment?
"Treat people as if they were what they ought to be and
you help them to become what they are capable of being."
~Johann Wolfgang von Goethe
"Our job this day is to become part of the answer
to the world's immense and protracted suffering
rather than continuing our ancient task
of being part of the difficulty."
~Hugh Prather
Need help paying off the balance of my tuition
I have recently graduated with my BSN. I had to pay the tuition out of pocket. I am not able to pay the balance of $2,000.00 to recieve my diploma. It will be held until I am able to pay the balance. Is there any help availble to help me? I cannot afford to take out a loan at this time. Please email me if there is.
Andre Daniels is an idiot
Don't be brain washed but the powers that be. They are just scared that if the general population is healthy, and well educated we wont stand for the crap they are pulling right now ! You are one of us, not one of them ! WAKE UP !!!
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