New student loan repayment plan may help borrowers

A new student loan repayment plan for federal student loans called Income Based Repayment (IBR) went into effect this month. To sum up, the plan, instituted by the federal government, will help some borrowers by reducing their required monthly payments to under 15% of their income.

So if you currently have a student loan payment that is higher than you can afford to pay with your income, this plan will help you. However, IBR doesn’t reduce the amount of interest you owe, so the longer you take to repay your loan, the more interest you will accrue. If you are already comfortably able to make your loan payments, it is probably a good idea to continue paying as much as you can–the faster you pay off your loan, the less interest you will be charged.

One interesting part about IBR is if you make IBR payments for 25 years, your remaining debt (most of which would be due to interest at this point) will be forgiven. And if you work in a public service or non-profit job, you only have to pay for 10 years. However, this plan only applies to federal loans and you’ll have to do extra paperwork, not to mention it’s still a LONG time to be making payments.

For more details and information see this website, and contact your lender to sign up for the plan.