A Different Way to Pay Back Student Loans
The government offers a variety of ways for students to pay back their federal loans, yet according to a study by the Consumer Financial Protection Bureau, two-thirds of borrowers are on the standard 10-year repayment plan. The remaining one-third of students work with the special plans the government has available.
Approximately 3 out of every 10 borrowers utilize the income based repayment plan, better known as IBR. In an IBR setup, a student’s loan payments are set to match his or her income. This brings the term loans from a fixed 10 years to a variable 25 years, depending on the income and the loan amount.
The IBR program is designed to make student loans more affordable while allowing the government to earn some money in interest because of the time frame. Experts say most students bypass this option because they don’t know about it or they find the enrollment process to be complicated.
Fortunately for borrowers, recent regulations have changed the way IBR plans work to make them more accessible for everyone. The White House has now adjusted the application process so students can enroll online. President Obama also made a cut in student debt collector commissions to make loans more affordable.
If you are in a standard repayment plan, consider some of the other alternatives that lie before you. You may be able to save yourself some money with a change in plans.