Tuesday, March 15, 2011

Student Loans

So, many of you out there have student loans. How many of you struggle to pay your loans. In this economy, it can be very difficult to meet our financial obligations: rent/mortgage, food, medical costs, clothing, bills.  For many of us, and I include myself in that number, bills come after the essentials of living and before luxuries such as entertainment.

If you have lost your job, or are making less money than you anticipated, you can look at the possiility of an Income Based Repaymet Plan.  In essence, the amount of your monthly income is capped depending upon the amount of your income.

Income Based Repayment Plans (“IBR”) are part of a legislative enactment called the College Cost Reduction and Access Act of 2007.  IBRs became available for use in July 1, 2009. This plan may be a helpful tool for borrowers who have incurred substantial student loans but who work in lower paying jobs such as the arts or the public interest sector.

One of the big disadvantages of the income based repayment plans is that you must supply sensitive financial information, such as your tax return, annually to your lender. Your lender then calculates your monthly payment under the plan according to federal guidelines. At the end of 25 years, any amount remaining on the loan is "forgiven" by the lender. However, under current legislation, any amount forgiven at the end of the 25 year period remains taxable as income in the year it is forgiven.

Of course, it is always better to pay off your student loans as quickly as possible. However, if it is not possible, take a look at Income Based Repayment. It may help you balance your life and end telephone calls from your lender.

For further information:




  1. This is excellent information...I wish I would have had this info in 2009 when I was struggling to keep afloat. Unfortunately, my student loan company (federal student loans) never mentioned them. Thankfully, because we've been frugal forever in a day---we've paid off all our debt but the student loan and our house payment. Now we are on track to just knock both of them out of the water and get completely debt free. (And just in time for my oldest to go to college!!)

    Cheers, Jenn