Making student loans easier NOW YOU CAN PICK EASIER TERMS TO REPAY FEDERAL COLLEGE LOANS
By Beth Kobliner

(MONEY Magazine) – A new federal financial aid law is beginning to make it easier for college students to manage their debt loads. "Now all students will have more reasonable payment schedules," says David Longanecker, an assistant secretary at the U.S. Department of Education. Anyone applying for a federal student loan can now select a graduated repayment plan, allowing smaller payments upon graduation and larger ones later on when the borrower will presumably be earning more. Lenders are already creating their own plans. One example: On a $10,000 Stafford Loan at 8% for the first four years and 10% thereafter, the borrower can make interest-only payments of $66.67 a month the first two years after graduation, $141.37 payments the next two years, and $149.37 the final six years. Borrowers taking out loans after July 1, 1994 could also choose an income- contingent repayment plan. That would require you to pay a fixed percentage of your postgraduate income toward your student debt -- probably about 5% to 10% of anything above the single-person poverty level, now $7,143 a year. All grads would also be able to lower their monthly payments an estimated 20% to 30% through an extended repayment plan -- that would let you stretch your loan term from 10 years to, say, 15 or 20 years.