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New Student Loan Repayment Plan Lighten Debt Burden For College Graduates

A large number of youngsters take student loans to complete their studies with the hope that they will be able to repay the loan once they get a suitable job. But because jobs are not sufficiently available in the current market, most of them end up with a student loan default and the number of such default is soaring at record high since the year 1998.
Starting form July, the situation has become a bit convenient for the students who are under debt of student loans. The variable rates of interest change take effect on 1st July of each year and this year, the interest rates have not only fallen, but a new option of repayment has also become available.

This new option is termed as Income Based Repayment under which the loan’s monthly installments will be based on individual income and family size. If you come under one and a half times less than the federal level of poverty, then you will not be required to pay any amount. If you make more than this level, then this will consider being your discretionary income and the amount you have to pay every month will be 15% of the discretionary income. The best thing about this plan is that after 25 years, your remaining balance will be written off. To know more about the new Income Based Repayment program, you can contact your lender for the options available to you.

For those who have variable rate Stanfford loan that was taken before July 1 2006, the interest rate will resets on July 1 each year as long as it has not been consolidated. Since the interest rate has been falling more than 2.48% this year, you will be able to save a good amount over the life of your loan if you decide to consolidate it now. However, the total saving will depend upon the current balance of your loan amount.

Students who are graduating in the 2009 are more at an advantage as if they consolidate during the 6 months after their graduation, which is considered to be the grace period, they will be able to lock in an interest rate of only 1.88%.

New subsidized Stafford loan’s borrowers will also enjoy a lower interest rate because as per the College Cost Reduction & Access Act, 2007, rate of interest on 2009-2010 loans will be 5.6% while last year, it was 6%. It is known that interest on these loans will continue falling until they reach 3.4% by 2011.

Pell Grants are given to those who are in ultimate need and borrowers are not required to repay these grants. As per the American Recovery & Reinvestment Act 2009, the Pell Grants has been increased to $5350 for the year 2009-2010.

There are some other perks that are announced recently. The best one is that if you are working in a public sector job on a full time basis, then your Federal Direct Consolidation loan, Federal Direct PLUS loan and Federal Direct Stafford Loan will be written off after 10 years. Public health, government jobs, education, law enforcement, fire fighters, several social work positions and employees of the 501 (c) (3) organizations, all come under the public sector jobs.