I have recently learned about a new program that will be good news to the hundreds of thousands of recent college graduates with significant student debt. A new program called Income-Based Repayment (“IBR”) may help you control your student loan debt.
IBR is a program introduced by the government in 2007; however, its full effects didn’t start until July 1, 2009 This program was designed to make sure that graduates who aren’t earning a significant income after graduation aren’t spending all their income on repaying their student loans.
IBR can help with individuals who meet the following criteria:
- Have loans (to students, not their parents) from either the Direct or Guaranteed (FFEL) loan programs or (most) government-funded loans
- Have enough debt to qualify. Specifically, you must have debt that would require you to spend more than 15 percent of your income in excess of 150% of the poverty level to pay off your loans in ten years – calculator available here
Interest Rates for Adjusted Loans
While the IBR program may make your monthly payments more affordable, it could also mean that your monthly payments don’t cover your full interest rates. This means that:
- For federally subsidized loans, the government would pay the remaining interest for the first three years
- For non-subsidized loans, the unpaid interest would be tacked onto the principal amount you owe
The second option may mean you end up paying more in the long term, but if your earnings increase over the years, this likely won’t be a significant problem. Plus, the IBR program has the unique provision that any amount still due after 25 years is forgiven.
What is Public Service Loan Forgiveness?
It’s the other loan forgiveness program taking full effect this month, and it’s designed to help those who work in certain so-called public service jobs, including those for the government and nonprofit 501(c)(3) organizations.
If your job qualifies under this program, your loans may be forgiven in full after 10 years of work (during which time you make normal loan payments). And, if your salary qualifies you for IBR loan payments while you’re working, you can still use that program to make payments more affordable.
To find out whether your employment situation may qualify you for help with student loans, visit IBR’s website. While student loans are not dischargeable in Chapter 7 bankruptcy, unless you are in a hardship situation, and have to be paid during the Chapter 13 bankruptcy, IBR may be that last piece of the puzzle on your road to a financial fresh start.
If you are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a bankruptcy attorney.