Student Loan Debt: Income-Based Repayment
Bad Debt Consolidation by splinder
Filed under Types of Debt
With rising college fees, higher cost of living and few jobs, student loan debt has become a recurrent issue. As per many surveys, almost 50% of college students have loans with an average loan amount of $10,000.[br]
Learning from the acute job shortage during the recession in 2008-09, managing and planning repayments ahead of time has become the need of the hour. Even the most attractive loan can turn into an unmanageable amount, if timely payments are not made. Though there is some respite for US students with the government introducing new methods to managing student debt.
Income-Based Repayment (IBR) and Student Loan Debt
In July, 2009, the federal government announced the Income Based Repayment program, under which students with federal loans can ask the government to limit their monthly payments to just 15% of their income.
There are two salient features of the IBR program:
· People who earn lesser than a budget of one-and-a-half times the poverty level are exempt from their loan obligations. However those who earn more will pay the 15% of the difference between their income and the base budget.
· People working in public services and earning a low income will have their loans written off after 10 years of income-based payments. Private sector professionals can enjoy the same facility after 25 years of regular payments.
Students can gain immensely from this service if they approach a federal agency for loans. For availing the IBR program, students need to consolidate their student loan debt with the government and then apply for IBR.[br]
Reducing Your Student Loan Debt
The need of IBR will rise only when students get behind their monthly payments. Paying off a student loan can be difficult without a job or income. Therefore a safe practice is to consolidate all the loans and start paying them as soon as possible. Consolidated loans result in lower interest rates and monthly payments. This makes managing debt easier. The number of creditors reduces and one can track payments easily. Along with consolidation, students should also inquire about other programs such as the income contingent repayment or income sensitive programs to reduce the student loan debt.