Student Loans Bailed Out?
Is a college degree worthless? Will your student loans be bailed out? Questions we have the right to ask ourselves, of course…
Federal students could be bailed out since there is a new (kind of ) program that may link your student loans to your income and forfeit (thus bailing you out) the balances after 25 years. In addition, this student loan bail out program could erase the student college debt of people working in public service (i.e. government employees, teachers in public schools and universities, workers at public hospitals and anyone working for a nonprofit organization can qualify) after 10 years, not bad (after making qualifying payments for 10 years, to be exact). In other words, this should costs the government nothing if we consider this from a different point of view, that is, the Government will now change the way it subsidizes student loan lenders
College bachelor diplomas do not come cheap and a large percentage of all college seniors who graduated in 2009 got on an average debt of more than $20,000…
If we consider graduate or more advanced diplomas like PhDs, well, the student debt incurred in this case is most of the times tens of thousands higher tahn the $20k… college graduate students struggle to find jobs in this downturn, and this has brought a rise in the default rate on student loans, and this can’t be renegotiated or discharged in bankruptcy so easily.
Income-Based Repayment (IBR)
The College Cost Reduction and Access Act of 2007 reduces the monthly payments for thousands of borrowers who qualify for the new Income-Based Repayment (IBR) plan that took effect July 1.
This IBR program will lower the monthly payments of people who accumulated significant federal student loan debt but don’t have the income to make the payments on the standard 10-year repayment plan. This relief may reach as many as 1 million people, according to the Project on Student Debt. And despite lower payments, the former students won’t be paying off their loans indefinitely – any remaining balance will be forgiven after payments are made for 25 years.
IBR caps monthly payments at 15% of earnings above 150% of the poverty line, or $10,830 for a single-person household; you can compare
- income based payments,
- income-contingent payments,
- income-sensitive payments.
with the help of online loan financial calculators that provide student aid on the web…
To give you an example, an MBA graduate who may have borrowed $100,000 or more with the target to become an management consultant or a star investment banker but instead ended up in one of the government service jobs listed above, well, with the Income-Based Repayment plan will get loan re-payments that can be affordable on the salary of a civil servant.
It should be remarked that we are not talking about linking loan payments on income, we are talking about this Income-Based Repayment plan that is certainly more generous, in fact, under certain circumstances the IBR loan repayment plan could indeed be zero. Student who believe can benefit from the loan Income-Based Repayment plan must contact their student loan lender and apply… and good luck!
