Today, student loan debt continues to climb. With the changing economy, many individuals â€“ both young and old â€“ have decided to pursue or continue their college education in hopes of obtaining a better job in the future.
Unfortunately, higher education does not come without a price. In many cases, a college degree can cost upwards of $100,000. Therefore, the pursuit of a college or university education oftentimes requires one to borrow some or all of the funds that are needed to pay the tab.
While there are a number of government student loan programs available, these funds are often not enough to cover the entire cost of tuition and other school related expenses. In such cases, one may need to turn to private lenders in order to finance the balance.
In any case, once the borrower’s repayments begin, the monthly payments can be substantial, and possibly even unmanageable, making it difficult for the borrower to budget for and pay their other necessary living expenses.
How Has President Obama’s Government Impacted Student Loans?
In many ways, President Obama and his administration have stepped in to help ease the burden of student loan payments for borrowers. One proposal, “Pay As You Earn,” will help in reducing the monthly payments on student loans for over 1.5 million borrowers. With this program â€“ beginning in 2014 â€“ student loan borrowers will be allowed to reduce their payments from 15 percent to 10 percent of their discretionary income amount.
This Income-Based Repayment plan will cap a borrower’s required monthly student loan payments on the primary types of government backed student loans to an amount that is considered to be affordable based upon the borrower’s income as well as the size of their family.
Eligible student loans include all PLUS and Stafford student loans, as well as the consolidated loans that have been made via the Federal Family Education Loan program and / or the Direct Loan program. It is important to note that any loan that is presently in default will not be eligible for this program, nor are Parent PLUS loans.
While the IBR program will help in lowering the monthly payment amount for borrowers who consolidate their loans, it could increase the length of the loan’s repayment term. In this case, it is likely that the borrower can end up paying more in interest charges over the life of the loan. In order to qualify for this IBR, or Income-Based Repayment program, a borrower’s income, family size, and state of residence are all considered. In addition, other factors include the borrower’s income relative to the amount of their student loan debt.
In most cases, if one’s IBR payment amount is less than the monthly payment that they are making on their eligible student loans under a 10-year standard repayment plan, they will typically qualify for this repayment plan.
To help in determining whether or not a borrower will qualify, the U.S. Department of Education has created an IBR calculator. This calculator will help in evaluating all of the pertinent qualification factors, and it will also provide an estimate of one’s new monthly loan payment for a student loan consolidation. This calculator may be found by visiting here.
Other Available Options
For those who hold private student loan debt, there is also a way to consolidate these balances into one single loan with a more manageable monthly payment. Such consolidations must be initiated through a private lender such as a bank or credit union.
Similar to with other student loan consolidation plans, borrowers are likely to reduce the amount of monthly payment that is owed â€“ especially if they extend their loan repayment terms. This can help a great deal in budgeting for other household financial needs such as rent or mortgage payments, auto loans, and other regular expenses.
Where to Find Additional Information
Those who are seeking additional information on the programs that are available to borrowers with government backed student loan debt should visit the government’s website. This website provides more details on how one can qualify for student loan consolidation, as well as on the application process.
This website also provides application materials for individuals who are ready to apply for a private student loan consolidation.
In any case, it is important to understand and consider all of one’s available options in a student loan consolidation situation, as well as the pros and cons of each. This way, a borrower can move forward with confidence that they are making the best choice for their specific needs.