|By Ashley Russell on January 16, 2012
In these bad economic times with tuition prices on the climb and minimum wage remaining steady, it can be expensive to attend school. But what is even more expensive is dealing with the interest rates and fees on loans accrued by college students. There are three very simple options to help students with their debt: the Income-Based Repayment program, the Direct Loan program, and the loan forgiveness program.
One great option for college graduates is the Income-Based Repayment (IBR) program. This is an innovative way for individuals to pay back their federal loans and makes them much more manageable. The program helps borrowers by making repayment plans based on several factors. Instead of being a set payment, the payments are calculated by income and family size. For the majority of eligible borrowers in the program the required repayment is less than 10% of their income, although it can be much higher. Then, if after 25 years the debt is not repaid in full, the rest of the debt is forgiven. This allows the individual to not be bogged down their entire life paying off student debt, but keeps them accountable for up to 25 years.
Another important tool for recent graduates is debt consolidation. If an individual qualifies, the Direct Loan program may have low enough interest rates that make debt consolidation worth the fees and trouble. Using a debt calculator through that program can assess this on a case by case basis. Using the Direct Loan program, if able, may save individuals significant money on interest. Since low interest federal loans have limits to how much can be taken out, many students have debt from private entities, sometimes with higher interest rates. Using a very low interest rate in debt consolidation can, therefore, save them money.
One final tool for recent graduates is loan forgiveness. There are various programs provided by the federal government that for qualifying jobs—usually in fairly low paying—the government will forgive of student’s debts. These programs are especially prevalent for teaching, law, and medicine, but may be available in other fields as well. For individuals with high amounts of federal debt and few job offers this is often a good choice.
There are federal programs out there to help students with their debts; however, students must take the initiative to find out which ones they qualify for or would be willing to participate in. Don’t get caught up in college debts for life, actively search for a program that will help eliminate those unnecessary costs.