It’s May. It’s Spring. The weather is warm. Summer is near. And millions of students are graduating from college and grad school. Most have at least some student loans. This is certainly an exciting time, but don’t let your student loan obligations surprise you in a few months. There are important things you need to know now so that you are prepared to manage your debt burden in the months ahead.
Do you have a large amount of federal student loan debt? Do you look at the obscene balance on your monthly statements and think to yourself, “Wow. I’m going to be paying this off for the rest of my life.” Well, you might not have to.
In 2007, Congress passed the College Cost Reduction and Access Act, which created the Income-Based Repayment program (also known as “IBR,” described in one of my earlier posts below). IBR and another repayment program, the Income-Contingent Repayment program (“ICR”), calculate a unique monthly payment amount for borrowers with relatively high amounts of federal student loan debt compared to their income. IBR and ICR keep your monthly payments low. The Act also provides two ways to get your loans forgiven.
Student loan debt outpaced credit card debt for the first time last year and is likely to top a trillion dollars this year as more students go to college and a growing share borrow money to do so.
While many economists say student debt should be seen in a more favorable light, the rising loan bills nevertheless mean that many graduates will be paying them for a longer time.
Recent graduate? Or graduating this spring? 6 reasons why you should think about consolidating.
If you’re like me (and millions of other student loan borrowers), you got through school with a wide variety of different federal student loans. Stafford Loans. Perkins Loans. Subsidized Loans. Unsubsidized Loans. Grad PLUS loans. Maybe others. Managing the repayment of each of these loans can really turn into a full-time job, and if you accidentally start missing payments, you’re in trouble.
You may be eligible to combine all of those loans into a single federal consolidation loan. Here are some of the benefits.
Income-based repayment (“IBR”) is a relatively new option available for federal student loan borrowers, and it can save you literally thousands of dollars. Unfortunately, many people who are still paying off their student loans don’t know about this program. Even if you are currently on a different repayment plan, you may be able to switch.
IBR is exactly what it sounds like it is: repayment plan that is based on your income; specifically, your adjusted gross income (AGI). The Department of Education uses a formula to calculate your monthly payment that takes into account your AGI, your family size, and your total federal student debt, and comes up with an payment amount for you that is generally between 10-15% of your monthly income, even if you have a large loan balance.
Loan Study on Students Goes Beyond Default Rates
By Tamar Lewin, New York Times
For each student who defaults on a loan, at least two more fall behind in payments on their student debt, a new study has found.
The Institute for Higher Education Policy, a nonprofit organization, said in a report that two out of five student loan borrowers were delinquent at some point in the first five years after they started repaying their loans.
Almost a quarter of the borrowers used an option to postpone payments to avoid delinquency…. Read more at: http://www.nytimes.com/
In general, most student loans will not be dischargeable in bankruptcy. There are some limited (and important) exceptions to this general rule which I will not be discussing in this posting, but for many people who have student loans, bankruptcy may not be an option.
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Adam S. Minsky, Esq. is a Boston lawyer who concentrates his practice in student loan law. To learn more, please visit www.minsky-law.com. These posts are for informational purposes only and are not intended to be taken as legal advice.