THE HELP DESK The Help Desk: Top Tips

Graduate to lower student loan costs

Got high student loan debt? Standby for some good news. There's a government plan that could lower your payments.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Gerri Willis, CNN personal finance editor

home_rich_cover.03.jpg
For more information on managing your largest investment, check out Gerri Willis' 'Home Rich,' now in bookstores.

NEW YORK (CNNMoney.com) -- Today the government will begin offering a repayment plan that lets graduates reduce their monthly student loan payments based on their income. It's called the income based repayment plan and it's available to borrowers who took out federal loans or used a federal consolidation loan to combine their debt.

1. Advantages and disadvantages

Some of the benefits of the program include the ability to get your monthly payments lowered.

If you make timely payments for 25 years, the balance of your loan is forgiven or if you go into public service, your debt is forgiven after 10 years.

But there are drawbacks. First, you'll pay more in interest over the life of the loan since you're stretching your payments out.

And you must submit documentation of your income and family size each year to set your payment amount. If you do not provide the documentation, your payment reverts to the standard 10-year repayment amount.

2. Do you qualify?

You will generally qualify if your federal student loan debt is high compared to your income and family size.

While your lender will perform the calculations to determine your eligibility, you can use the Education Departments calculator at studentaid.ed.gov to estimate if you would benefit from this program.

Contact your lender or the lenders who hold your student loans. Keep in mind you may need to submit a copy of last year's taxes.

3. Help for the unemployed

If you don't have any income at all either because you can't find a job, or you lost your job, you can still take part in this program. And if you qualify, your monthly payments could turn out to be zero.

Keep in mind there are other options out there too. The government has always allowed for people who can't make their student loan payments to apply for deferments and forbearances.

In both cases you can stop making payments for a little while. The debt doesn't go away, but interest does continue to accrue even if you don't make payments.

And, just to mention another bit of good news, interest rates on subsidized undergrad Stafford loans are now at 5.6% and older variable rate Stafford loans consolidated after today will carry an interest rate of 2% -- a historic low.

-- CNN's Jen Haley contributed to this article.

Got a financial dilemma? Go to CNNMoney.com/helpdesk to submit questions, read the Help Desk articles and check out new Help Desk videos. And tune in to CNN's Newsroom Tuesdays and Fridays, when Gerri Willis and other experts answer your questions. To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
These 10 food trends could dominate 2015 So long, kale. Here's what's expected to shake up the food industry next year. More
Beyond Russia: Geopolitical hot spots in 2015 Investors beware: These 5 global crises are likely to rattle the stock market and world economy. More
These 20 antique guns could fetch big bucks Morphy Auctions in Pennsylvania is putting nearly 1,000 old guns on the block. Here are just a few. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.