Program cuts cost of student loans

High monthly student loan payments can seem insurmountable for college graduates.
But a new loan repayment plan is hailed by many in the education world as a way to help eliminate mountainous monthly loan payments for graduates grappling with their federal loans.
"It's an ideal opportunity to lower those monthly payments," said Shelly Brimeyer, assistant director of financial planning at Loras College.
That opportunity is available through Income-Based Repayment, which is a provision in the College Cost Reduction and Access Act that took effect July 1, 2009.
The new repayment plan caps monthly federal student loan payments at an affordable level based on income and family size, and forgives any debt and interest that remains after 25 years.
Borrowers who owe more on their federal student loans than what they make in a year will most likely benefit.
"The good thing is the lower the income, the lower the monthly payments," said Sharon Willenborg, director of financial aid at Clarke College.
For most eligible borrowers,
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loan payments would be 10 percent of their income.
The new repayment plan is available for almost all student federal loans -- past, present or future --made by any lender for college or graduate school. Individuals must contact their loan provider to apply.
Because the payments will be lower, most loans will likely require a longer repayment period.
"They're paying more interest overall, but it's a better option than missing payments," Brimeyer said.
Borrowers who work in a government, nonprofit or other public-service job could have their remaining student loan debt forgiven after just 10 years through the Public Service Loan Forgiveness Program, which is part of the College Cost Reduction and Access Act.


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