Income Based Repayment for Federal Student Loans

There’s a new program for government college loans that gives students with big college debt some relief. It is based on your income and family size, so that if you have a large debt and a small salary, your payments are adjusted taking your family size into consideration as well. This new program, appropriately called Income Based Repayment (IBR), is available now for people who have any Stafford, Grad PLUS or Consolidation loan made under either the Direct Loan or program, unless the loan is in default, parent PLUS Loans, or consolidation loans that repaid a parent PLUS Loan. Although your lender will make the calculations to determine a new payment, you can find out if you are eligible and approximately how much difference this program would make on your monthly payment by going to the government’s IBR Calculator.

To use the IBR Calculator you will need to know your estimated adjusted gross income, the amount that you owed on your eligible federal student loans when you entered repayment, the estimated average interest rate on your eligible federal student loan, and your family size. You plug these figures into the IBR Calculator, and this gives you the payment amount your would pay on your government student aid through the Income Based Repayment plan. If that payment is lower than the monthly payment under a 10-year standard repayment plan, then you are eligible to repay your loans under IBR.

During this time of economic hardship and mounting student debt, this federal student loan program could be a lifesaver for many students and their families. Check it out at the Federal Student Aid website.

Blessings,
Bonnie

Financial Aid – Fill Out FAFSA Now

Well, the holidays are over, and it’s time to start thinking about the FAFSA (Free Application for Federal Student Aid). I do hope you had a wonderful Christmas, but it's time to get to work!

EVERYONE should fill out the FAFSA, even if they don’t think they qualify for financial aid.

The reasons are simple. Believe it or not, colleges with high endowments and universities that are expensive offer financial aid to families with high incomes. You might be surprised by how much financial aid you qualify for. Many colleges have stopped including loans as part of their financial aid packages and are using more of their endowments than they have in the past.

Even if all you qualify for are loans, you may be eligible for federally-subsidized loans, which have lower interest than private loans. Private loans should only be used as a last resort!

If you don’t fill out the FAFSA, you may miss out on all sorts of financial aid.

Although the federal deadline for submitting the FAFSA is June 30, 2008, many states and schools have earlier deadlines. Two of the colleges I checked had deadlines of Feb. 15, 2008 and one said to submit it as soon after January 1^st as possible.

Besides the state and university deadlines, there is another good reason for getting it in as soon as possible. Part of the financial aid given students is provided by the individual colleges. When it is gone, it’s gone, so the sooner you apply the better.

So go to the FAFSA website and start getting organized. There are papers to be collected, taxes to estimate or complete, PINs to apply for. The sooner you get started, the better!

Next blog I’ll talk about ethical ways to minimize the EFC (Expected Family Contribution).

Blessings,
Bonnie