Income-Based Repayment on Student Loans
Are you having a hard time making your monthly student loan payments? With an average student loan balance of about $25,000 and an average monthly payment of around $250 per month, many former college students find it hard to get the money together.
If you are among those who struggle to pay off the cost of their education, don’t worry. You have plenty of options to make it easier for you to pay. You can defer or go into need-based forbearance if your situation has taken a sudden turn for the worse. However, if the problem is more chronic, you may need to find a different solution.
What is income-based repayment?
If you have a job but simply don’t make enough money to meet all of your expenses, you can see if you qualify for income-based repayment. This is one of the best-kept secrets regarding federal student debt like Stafford and PLUS loans, and it consists of reducing your monthly payment to match your level of income.
How does income-based repayment work?
While it is largely based on your income, you may also be able to reduce your monthly payment further based on other criteria such as caring for children. For instance, a teacher with one child normally paying nearly $700 per month could have her monthly payment reduced to just under $300 per month.
What’s the catch?
Keep in mind that even with IBR, the principal balance is not changed. A 10-year loan might extend to a 25-year loan, and more interest would accrue over time. However, the IBR program has several measures in place to reward consistent loan payers, including the eligibility for loan forgiveness after 10+ years of payment for non-profit and government workers.
If you feel buried by student loan debt, don’t worry! There are ways to get out. You always have options. Visit the U.S. Department of Education IBR website for more information.
July 24, 2012 Posted in Student Loans Tagged income based repayments, student loan debt Leave a comment
