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If you’re depending on student loans to keep you in college, or still have some left to pay after graduating, there’s new help from Uncle Sam targeted to those having trouble making ends meet.
“I’ve taken out about $35,000 – $40,000 of loans already, and it’s kinda tough because I’m still trying to figure out how much I’m going to pay per month.”
-Lesly-Loudmar Mathurim, Recent Grad
Lesly’s case is common… you skate through school only to find yourself deeply in debt. And as a twist to the knife, graduating into one of the worst economies in decades. If that’s you, and you’ve got a Federal student loan or a Federal Consolidation loan, Uncle Sam’s got some good news: a new program that bases your monthly payments on your ability to pay.
It’s called the Income Based Repayment Plan. What it can do is lower your student loan payments by stretching out the payment period to 25 years rather than the customary 10. The amount of your monthly payment is based on your income and family size.
To get an estimate of what you’ll pay, there’s a handy online calculator that will tell you in seconds. For example, if you earn $30,000 a year and have a family of 3, your payments will be about 30 bucks a month.
There are potential drawbacks to this program: first, stretching payments over more years could mean ultimately paying more interest. Plus, you’ve got to document your income and family size every year. But if you make those payments for 25 years without missing any, they’re going to close the book on any remaining balance.
Bottom line? In this tough economy, there are so many programs designed to help, it’s tough to keep track of them all. But if you’ve got student loans to repay, this is one you should study.