Former students like new rules on paying off loans
By Kate York, kyork@mariettatimes.comFederal student loans may become a little easier for struggling individuals and families to pay, due to a new program that caps monthly payments based on income and family size.
Also under the program, which began this week, remaining balances would be forgiven after 25 years, or after 10 years for those working in public service.
It's a program that could impact thousands of local students enrolled now as well as many who are well past graduation but having a hard time making regular payments.
"I struggle right now," admits Tricia Long, 31, of Marietta, who got a business degree but is now a stay-at-home mom. "You look at the cost as an investment but now I'm not getting money back from it. All the people who are losing their jobs are in the same boat."
Long said she plans to go back to work when her children are older but in the meantime her husband's salary has to fund all the needs of a family of four, including paying her college loans.
"We're OK," she said. "But lowering those payments would be a big help."
The new Income Based Repayment (IBR) is a result of the Department of Education's College Cost Reduction and Access Act, signed in 2007, which authorized the creation of an income-based payment plan for repayment of federal loans.
One million people are expected to enroll, according to the Associated Press.
Part of that million may be some local students and graduates. Nearly 90 percent of the students at Washington State Community College receive state or federal financial aid and at Marietta College, 83 percent of students receive need-based financial aid.
The average aid package at Marietta College is $21,000, much of which must be paid back after graduation.
Marietta resident Diane Summers, 29, didn't graduate from Marietta College but after attending for three semesters she had nearly $20,000 in loans to pay back.
"I didn't get the scholarships and other help that some people can get and when you're 18 you don't really think about paying loans back," she said. "You just take them and don't have a real concept of what that will mean later on."
Summers is still making payments on those loans but plans to look into the Income Based Payment program.
Under the program, those who earn less than $16,000 a year would not have to make any monthly payments.
For others enrolled, monthly payments would be less than 10 percent of income for most people and would never exceed 15 percent of any income above $16,000 a year, or 150 percent of the poverty level.
"It's a way to borrow for college without going to the poor house," said Lauren Asher, president of the Institute for College Access & Success, a California-based nonprofit that runs the Project on Student Debt. "It can lower costs and provides light at the end of the tunnel."
Borrowers who work in public service can have remaining balances forgiven after just 10 years, with that clause applying to anyone working for federal, state, or local entities, for a nonprofit, tax exempt 501 (c) (3) organization or for the AmeriCorps or Peace Corps.
Those who work for public schools and colleges also fall into that category as do employees of some other businesses not organized for profit, such as labor unions, political organizations, agencies that provide services for the elderly or people with disabilities or those who work in public health.
However, experts warn that the program won't benefit everyone.
In some cases, the lower payments could mean much more interest over the life of the loan and if a rise in salary later disqualifies a person from the program, he or she would still be responsible for the interest up to that point.
A calculator is available to help determine eligibility for the plan, at www.ibrinfo.org.
The Associated Press contributed.
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TheGuyNextDoor
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07-05-09 12:01 AM
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The program isn't tailored toward people with social work degrees. It gives anyone who works in public service for "x" time an exemption, which would cover a wide variety of majors.
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DreamerLady
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07-04-09 2:14 PM
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My husband and I got his school loans down to about 10k, fell on major hard times, and now owe over 23,000k. They are demanding almost 300 a month now in payments and if we don't pay this then of course it doesn't look good on our credit. We went from making 80k a year to 31k a year in less than a year back when our oldest were just babies and have yet to bounce back completely. The saddest thing of all is my husband served the country for years! The army promised to pay and never paid a red cent!
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bwc511
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07-04-09 1:00 PM
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I have said it once on here, and will say it until I die... stop running your universities like businesses. Not everyone needs, should or wants to go to university. Most people simply want and need job training, not education à la summer camp for adult babies.
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Orchardfarmer
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07-04-09 10:11 AM
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It appears that under the new rules, I should go to Harvard, get a degree in social work - which will cost $200,000 - and go to work at $15,000 for a non-profit for 10 years. Then I just got a free education, right? What good does this do the country, when we need more scientists and engineers?
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collegeloanconsultant
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07-04-09 7:36 AM
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Once you qualify for this <a href="***********collegeloanconsultant****/monthly-payment-formula.html">monthly payment formula</a> you will not get 'kicked out' of the program (unless you do not make your payments). However, these payments will be adjusted every year based on your income/family size. They will never be more than the standard repayment amount that you would have paid when the loans first became due.
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