New repayment optionsStafford loans aren't just cheaper to get; they're now easier to pay back, too. Thanks to the government's new income-based repayment plan, students who borrow more than they can afford to pay back may be able to escape some of their debt.
"It's designed for people that are in very, very worthy professions like social work where the pay may not be as recognized as other professions," says Norm Bedford, director of financial aid at the University of Nevada, Las Vegas. After 10 years, he says, "people in public service fields can have their debt forgiven."
Bedford adds that all students with federal loans, regardless of profession, are eligible for the new income-based repayment option. Monthly loan payments for students choosing this option are capped at 15 percent of a borrower's discretionary income, defined as any earnings above 150 percent of the poverty line, or $16,245 for a family of one. So a grad who earns $16,245 or less would have no payments at all, while a grad earning $30,000 per year would pay no more than $172 a month toward student loans.
The income-based repayment program requires students who don't qualify for public service loan forgiveness to make payments for 25 years, after which, their loan is forgiven. Economic hardship deferments do count toward eventual forgiveness. Forbearance doesn't count -- but neither option will kick you out of the program. Should the student take deferment or forbearance for reasons other than economic hardship, time spent without making loan payments will not count. Those who work full-time in public service fields for tax-exempt nonprofit organizations, the government (federal, state or local), the Peace Corps or AmeriCorps can have their debt forgiven after 10 years of payments.
The Department of Education reports that those who seek public service loan forgiveness can count payments made after Oct. 1, 2007, toward fulfilling the income-based plan's requirements. Those seeking regular (25-year) loan forgiveness can only count payments made after July 1, 2009.
Help for military personnelChanges in college financing means good news for veterans as well, says Keith Wilson, education service director for the U.S. Department of Veterans Affairs. As of Aug. 1, those who served 90 days of active service or reserve duty on or after Sept. 11, 2001, or those who served at least 30 days of active duty but were discharged due to a service-connected disability will be eligible to have tuition, fees, housing and up to $1,000 worth of books at a public in-state college or university paid for by the U.S. government.
"The new (Post-9/11 GI Bill) can be used for up to 15 years after the service was completed, which is five years longer than the Montgomery GI Bill allows," says Wilson. "Under the new bill, service members can also transfer their GI benefits to their spouse or children."
On top of increased educational funding, Wilson says that post-9/11 vets who served at least 36 months of active duty may also be eligible for "Yellow Ribbon" benefits at participating institutions. A public-private partnership between the Department of Veterans Affairs and more than 1,100 public and private institutions nationwide, the Yellow Ribbon GI Education Enhancement Program discounts tuition and fees on a first-come, first-served basis.
Wilson encourages vets to visit www.gibill.va.gov to view eligibility requirements for both programs. "This is going to change the entire education landscape for us," he says.
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