Dave_Berry

"Repaying a student loan could soon be a little less painful. Starting this week, anyone with a federal student loan can apply for a new Education Department program, which caps monthly payments based on income and which forgives remaining balances after 25 years. Those agreeing to public service work could have loans forgiven after 10 years."

washingtonpost.com

thumper1

Just sent the link to my DS who doesn't earn a huge amount of money.

tenisghs

This is great news. Too bad programs like these don't exist for people who have PRIVATE loan debt.

thumper1

My biggest question...if a student has this "low income" option, does the loan balance continue to accrue interest and get shifted ahead years...or what? I suggested to my kid that he look into the lower repayment option BUT also consider paying the interest that is accruing. Otherwise that could really add up.

letmeinnow

I can't help but wonder who is going to be stuck paying the bills when the students' loans are forgiven after 10 years if they go into public service or after 25 years for the general public. Does this worry anyone else? Why would anyone pay their student loans if they were just going to be forgiven eventually?

romanigypsyeyes

That calculator on there does not work. We were using it to figure out my sister's info and what she would pay and every time you click "calculate" it gives you a different estimate even if you haven't changed any of the numbers. She makes about 15k a year and her monthly payments ranged from $20
/month-$500/month. A few times it even told her she wouldn't qualify. However, she should qualify for $0 because she is <150% of povery level.

ThatPoshGirl

The report I saw said after 25 years of payments. I don't think you can just default on your loan and then 25 years later it magically disappears. You have to pay based on your income during that time.

Erin's Dad

I hope this doesn't bring about bad behavior - students thinking they can get their loans forgiven so they become MORE likely to take higher loans.

Chedva

Public service work - I wonder if this means that you have to be in public service for the entire 10 years? Start in public service? End the 10 years in public service? How is public service defined?

The devil's always in the details.

ThatPoshGirl

I think this is a good step to a more efficient system, but it could be better. I mentioned to a friend in Australia about needing to get a deferment for my loan when I was laid off and she was absolutely blown away. Apparently in Australia your student loan payments come directly out of your paycheck and are based on your income, basically like a tax. If you aren't working you aren't paying, no need for paperwork or phone calls. It sounds a lot more efficient to me than our current system.

thumper1

You don't get them forgiven unless you live at a poverty level for 25 years....or work in public service which is like living at a poverty level.

But for students in "underpaid" jobs as many seem to have this year, this is a wonderful relief until they find more lucrative employment.

Re: "who is going to pay"...the federal government has had some loan forgiveness for decades. I worked in low income/priority school district for ten years and my loans were forgiven also.

MSmom&dad

The NYtimes article (http://www.nytimes.com/2009/06/30/ed...llege.html?hpw) about this program provides more details and discusses accrued interest etc. It sounds like a good program to me. It will give relief to those that really need it and if you enter public service a little boost to make up for the lower earnings in that sector. Hopefully my S and D (in college/starting college) won't need to use this - but its nice to know there is some backstop if the going gets rough.

juillet

I'm pretty sure that you would have to be in public service for the entire 10 years, and public service usually means working for the government in some capacity. Sometimes working in allied health or as a physician in an underserved area counts too.

The details are usually very clearly outlined when these loan repayment programs come up.

This really isn't radically different from anything they're already doing -- it's just another way to repay your student loans. They already have graduated repayment (which is when your monthly payment starts out small and gets bigger over time) and extended repayment (allowing you to repay over 30 years instead of 10). This is just a natural extension cognizant of the times -- repayment based on your income. You will probably accrue interest during the months that you don't repay if you are under the poverty line (as deferred loans and loans in forbearance still accrue interest as well, even if you defer them for financial hardship). I think the idea is that if your loan payments are income-based, you should be finished paying them off before 25 years.

Man, I wish my Stafford loan rate was 3.4% instead of the standard 6.8%.

tenisghs

Woo-hoo! This is definitely a victory for college students (drop in interest rates on Stafford loans)

TrinSF

I'm really happy about this because it affects my loans, though I really wish it had existed when I originally got them, 25 years ago! If so, they'd already be completely forgiven!