According to an article in the Star-Telegram, the new income contingent repayment plan for federal student loans is now available. Under the new plan, borrowers can repay their student loans based on their income and the balance will be forgiven after 25 years.
The article said:
“The income-based repayment plan applies to the Federal Family Education Loan, and to Direct Loan borrowers on all Stafford and graduate PLUS loans. Monthly payments would amount to less than 10 percent of income for most of the estimated 1 million people expected to enroll, experts say. Payments would never exceed 15 percent of any income above about $16,000 a year (or 150 percent of the poverty level). Those who earn less than $16,000 would not have to make any monthly payments.”
Borrowers who sign-up for this program should be cautious because the overall cost of the loan may increase due to accruing interest and you still may not have a balance to forgive after 25 years. Do the math to make sure that you will benefit from this program before you apply. You can also use the estimated payment calculator . This calculator will estimate how much money you will be required to pay each month on your student loan if you’re approved for the income contingent repayment program. You may want to compare the monthly costs and long-term costs of each repayment program before you commit.
If you are currently unemployed, you can ask for a temporary deferment while your income contingent repayment application is being approved. Read our previous blog ” More Relief For Debtors With Student Loans ” to find out more about the various programs designed to help student loan debtors. Also, remember that although most debtors cannot discharge their student loans in bankruptcy, student loans can be repaid through Chapter 13 bankruptcy . Contact the bankruptcy attorneys at Allmand law to find out more about how student loans are handled in bankruptcy.