Many college students who graduated recently have likely had a hard time finding a job, and the six months’ forbearance they had to avoid high bill payments is rapidly coming to a close. However, the U.S. Department of Education recently stepped in to make payments easier for all recent grads.
The Department of Education’s final regulations on federal student loans, issued last week, provide a new payment plan option that allows graduates to make steady contributions into their outstanding debts based on their personal income, and many experts say this measure is a long time coming, according to a report from the Institute for College Access and Success, which houses the national Project on Student Debt. Further, the Education Department also shortened the period during which students are required to pay into their loans from 25 years to 20.
The rules make both income-based and income-contingent repayment options more accessible for federal student loan borrowers, and also makes discharging of these payments altogether for those who suffer total and permanent disability easier to navigate, the report said. Already, the existing income-based repayment rules have allowed more than a million students to reduce their monthly payments since July 2009.
“Especially in this economy, IBR could be helping millions more people make affordable payments instead of falling so deep in the hole that they can’t climb out,” said Lauren Asher, president of TICAS. “More needs to be done to tell struggling borrowers about IBR.”
Now, the rules allow student loan borrowers to get more information about when they must submit updated information on their income, as well as when they will be able to qualify for certain types of loan forgiveness, the report said. Further, it’s now easier to enroll, and debtors will be able to update their income every year online. That, in particular, should be helpful because it allows consumers to get more information about their obligations in a faster period of time.
Of course, when it comes to private student loans, students may not have as many options, which can be troubling because often, federal lending falls short of rising tuition and other school-related costs. For this reason, private borrowers should make sure they are fully aware of their obligations after graduation.
Image: Herkie, via Flickr