IBR, A Federal Plan To Lessen Student Loans

Beginning this week, those with federal student loans can apply for a program, run by the Department of Education, that caps monthly payments based on income, and, here's the most interesting part, forgives the remaining balances after 25 years. If you work in public service your loan could be forgiven after just 10 years.

The new student loans program, called Income-Based Repayment, starts on Wednesday. The site, at IBRInfo.org has much info on the program, as well as a video about it. The video is, additionally, linked to this post.

The program stems from the Education Department’s College Cost Reduction and Access Act, which was signed in 2007. It authorized the creation of a new income-based repayment plan for both Federal Family Education Loan (FFEL) and Direct Loan borrowers on all Stafford and graduate PLUS loans.

For most of the estimated one million people expected to enroll, montly payments would amount to less than 10% of their income. Student loans payments would never exceed 15% of any income above about $16,000 a year (or 150 percent of the poverty level), while those who earn less than $16,000 would not have to make any monthly payments.

However, naturally, as you fail to pay back principal, the interest will accrue on your student loan. That's the negative part of the program. Some experts say that since most loans will be repaid over the 25 year period anyway, there would be no advantage to the "forgiveness" aspect.

There is a similar student loans help program already in placed called the income-contingent repayment plan. However, that plan is less lenient, as payments are capped at 20% of income beyond 100 percent of the poverty level. And it’s also only available for direct federal loans.

The IBR consolidation program will be available for direct federal student loans and federal loans through private lenders. Experts expect many in the older plan to switch to the new plan.

Wednesday is the date that the new student loans repayment plan begins. Expect that IBRInfo site to sink under the weight of multiple hits that day as many students will seek ways get student loan consolidation through this program.