FINALLY - A Student Loan Payment Perfect for ME!

July 1, 2009 brought a truly revolutionary change to the Direct and FFELP student loan programs. The new Income-Based Repayment (IBR) plan finally recognizes that "one size does not fit all". While there have always been payment plan options, they tended to generate monthly payments that were strictly related to your loan balance - in other words, the more you owed, the higher the monthly loan payment would be! For borrowers who have chosen careers in the public sector or had to accept entry level positions for their career path, these options were not enough. Frequently, while borrowers wanted to make payments, they were "forced" to use Forbearance because their only payment options were beyond their reach.

As you know, Forbearance will provide payment relief, but it also allows the loan's balance to grow, often at what seem to be astronomical rates. The interest can add up very quickly. For example, let’s say you have $15,500 in student loans and have a Standard Repayment plan with 120 payments @ 6.8% interest. Your monthly payments are $179 a month. However, if you use 36 months of Forbearance, your monthly payment will increase to $215 and you will pay back an additional $4,367 in interest or 20+% more over the loan’s repayment period. (Source: NCHELP Reference Library, Going Above & Beyond: Delinquency & Default Prevention - Slide 11, http://www.nchelp.org/elibrary/index.cfm?parent=1983) WOW – talk about a snowball effect!

With the new IBR plan, your monthly payment will be based on your specific financial situation, not a preset amount based on your loan balance. For borrowers experiencing partial financial hardship (and with today’s economic challenges many of us are), this plan can allow you to remain in a Repayment Status with manageable monthly payments. This can help create positive input to your credit reports.

So, you are probably wondering "How can I get on this plan?" In order to be approved for the IBR plan, a borrower must provide additional information but the payment will make it well worth the effort. To see if you might qualify for an IBR payment plan, use this simple calculator: http://www.aie.org/Calculators/IBR/index.cfm?cid=tgslcibrpage If this indicates you may qualify for the new IBR plan, hop on the phone and contact your servicer!