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Student Loan Help – Getting the Assistance From Government Programs
With the hopes of providing student loan help to current students and graduates, the government has initiated a repayment program based on income that became effective July 1. If you meet the required criteria, you can ask to have your monthly payments lowered to no less than 15% of your income.
For those who qualify, the average payment will be 15% of the difference between the base budget allowance and their current income. Then again, you may not have to pay anything if you fall within the one and half times the poverty level.
This program offers something that others don’t. That is complete forgiveness of your debt after a certain time period depending on your job or income level. Qualifying for the program based on your income will mean that after 25 years of paying on your debt, the rest of it will be forgiven. After 10 years of paying, if you are in a public service position, the debt will be forgiven. Both require that you stay current on your payments.
Most lenders have offered income based repayment for years but don’t mistake this for the government program now in place. Make sure to only apply for federal loans in order to take full advantage of the program. When you are looking into obtaining student loans, make sure to comparison shop. Contact your lender to apply for the program if you are no longer attending school.
If you are in a public service job, make sure to consolidate your loans and then apply for the program. Private lenders will not offer this program to you. You will need to keep records of your payments and the like so that at the end of the 10 year period, you can apply for the forgiveness portion of the loan program. You are going to have to provide proof that you followed all the rules in order for your loan to be forgiven.
There are some downsides to the program though. For instance, if you qualify but your payments don’t cover the interest portion of your loan, your debt will continue to increase until you reach the forgiveness period. There is a chance that you will have to pay taxes on the forgiven amount if you are not in a public service job. Also, if you have defaulted on your loans, the program will not lower your payments. If you have gone into default, you will not qualify for the program at all.
Types of loans not covered under the new program include parent, private, signature or alternative loans.
Finally, if your income is high enough that your loans are less than 15% of your income, regardless of what other debt you may have, you won’t qualify either.
If you think that all this fine print will disqualify you, don’t worry. There are several groups who are lobbying at this time to have improvements made to the program. Congress is already looking at making changes.
Student loan refinancing may be the way out of debt. To refinance student loans, visit Pay-Off-Student-Loan.com
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