» Income Based Repayment

Updates to Income Based Repayment Program

admin — Wed, 15 Sep 2010 02:10:55 +0000

A couple of new changes to the Income Based Repayment (IBR) Program make it an even better deal for students with high loans and low salaries. This program was designed to make federal student loan payments reasonable in comparison to a person’s income. As part of the IBR Program loan payments are based on a percentage of income and after 25 years any remaining debt is forgiven.

Eligibility Change

More people will be eligible for the IBR Program, because now eligibility is based on either the balance of the loan when it entered repayment or the current balance, whichever is greater. (Borrowers’ loan balances can increase during periods of deferment or forbearance due to accrued interest.)

Married Borrowers

Married couples who both have federal student loans will no longer have to pay higher payments than unmarried students. If the married borrowers file joint tax returns, lenders must use the combined loan total and the combined income to calculate the loan repayment amount under IBR. In the past lenders used combined income, but not the combined amount of the loans, resulting in higher repayments.

Another thing to consider

While the IBR Program can be a welcome relief, especially in difficult times like these, one result of paying lower payments is that you also pay for a longer time. This means you will pay more interest on a loan. The 10-Year Standard Repayment Plan offers a lower total repayment on federal student loans. It works just like credit cards. If you may a lower amount for a longer time, the total paid will be larger. Something to consider if you are thinking about applying to the IBR Program.

IBR Calculator

If you would like to determine if you qualify for the IBR Program and approximately what your loan payments would be, use this calculator provided by the Federal Student Aid website.

Blessings,

Bonnie

Federal Financial Aid Changes for the Better

admin — Fri, 21 May 2010 21:02:15 +0000

The federal government has made some very positive changes to their financial aid program. Although the changes will not be implemented immediately, they still will help ease the burden on cash-strapped and debt-ridden students and their families. Recent changes include ending subsidies to private lenders, which generate nearly $68 billion in savings over the next 11 years. This savings means that more money will be available to students. As part of the Health Care and Education Reconciliation Act, more than $40 billion will be invested in Pell Grants, which do not need to be repaid.

Pell Grants

Pell Grants are based on financial need, costs to attend college, the student’s status as either a full-time or a part-time student and whether the student plans to attend college for a full academic year or less. The maximum Pell Grant award for the 2010-11 award year (July 1, 2010 to June 30, 2011) is $5,550. Any Pell Grant eligible student whose parent or guardian died as a result of military service in Iraq or Afghanistan after September 11, 2001 is awarded the maximum amount if the student is under 24 years old and was enrolled at least part-time in college at the time of the parent’s or guardian’s death.

A student can receive up to two consecutive Pell Grant awards during a single award year to accelerate the program toward the student’s degree. The student must be enrolled at least half-time and in a program that leads to an associate or bachelor’s degree or certificate.

Income Based Repayment Program

Much of federal student financial aid is in the form of loans. However, a new program called the Income Based Repayment Program makes federal loans less painful. Borrowers who participate in this program will have monthly payments capped at 10 percent of the income a borrower has left over after covering basic needs and after 20 years any remaining debt is forgiven. If the borrower becomes a teacher, nurse, member of the armed forces or other public service worker, the remaining debt is forgiven after 10 years. Federal loans were already a much better deal than any private education loan, but with this new program, they become even better.

Current Income Based Repayment Program (IBR)

Right now students are eligible for IBR if their monthly payments under this plan are less than their monthly payments calculated under a 10-year standard repayment plan. Also students have to pay for 25 years and meet other requirement s before any balances of their loans are canceled. However, public service workers already can have the remainder of their loans canceled after 10 years.

For more important information about IBR, go to IBR Plan Information. Or, to download an IBR Fact Sheet in PDF format, click here.

Find out if you qualify. To calculate your estimated loan payment amount under IBR, go to the IBR calculator.

Fill Out the FAFSA to Qualify for Federal Student Aid

Remember, students must fill out the FAFSA to qualify for federal student aid, so even if you think you make too much money to qualify for grants, it is always smart to fill out the FAFSA. Some of the loans are not dependent on income level, so they are going to be available no matter what your income. Interest is lower for federal loans and the new Income Based Repayment Program makes federal loans even more attractive.

Income Based Repayment for Federal Student Loans

admin — Thu, 16 Jul 2009 15:49:00 +0000

There’s a new program for government college loans that gives students with big college debt some relief. It is based on your income and family size, so that if you have a large debt and a small salary, your payments are adjusted taking your family size into consideration as well. This new program, appropriately called Income Based Repayment (IBR), is available now for people who have loans made under either the William D. Ford Direct Loan (Direct Loan) Program or the Federal Family Education Loan (FFEL) Program. These include all Direct and FFEL loans EXCEPT Parents PLUS and consolidation loans used to repay Parent PLUS loans and loans in default. Although your lender will make the calculations to determine a new payment, you can find out if you are eligible and approximately how much difference this program would make on your monthly payment by going to the government’s IBR Calculator.

To use the IBR Calculator you will need to know your estimated adjusted gross income, the amount that you owed on your eligible federal student loans when you entered repayment, the estimated average interest rate on your eligible federal student loan, and your family size. You plug these figures into the IBR Calculator, and this gives you the payment amount your would pay on your government student aid through the Income Based Repayment plan. If that payment is lower than the monthly payment under a 10-year standard repayment plan, then you are eligible to repay your loans under IBR.

During this time of economic hardship and mounting student debt, this federal student loan program could be a lifesaver for many students and their families. Check it out at the Federal Student Aid website.

Blessings,
Bonnie