Month: May 2016
Repayment Plans available to Student Loan Borrowers
It’s a great decade for loan borrowers. Finally, the US administration realised the need to revolutionise the education system in the country and focussed emphatically on the need to link it with financial institutions, there has been a sense of relief expressed by borrowers. Federal student loan borrowers can now enjoy a more lenient action from the lenders as per amendments proposed by the Departments of Education and Treasury and the Consumer Financial Protection Bureau.
The new guidelines for loan repayment and loan forgiveness program for nurses, teachers and doctors have been systematically mentioned in a guide book called “Payback Playbook”. The borrowers would receive the guidebook whenever the borrower applies and receives loan from the servicer. A borrower from Student Loan forgiveness program can pick a payment mode best suited to his/her financial capability.
Repayment plans available
Currently there are 8 distinct repayment plans that a student borrower can apply for. Although a borrower can select or get a repayment plan assigned according to the forgiveness demanded. No matter which stage of debt repayment you belong to, a continuous association with the lenders through federal agency remains the key.
A borrower can change the plans anytime, absolutely free of cost.
Here are your choices.
Standard Repayment Plan
The following loans are included in the plan for repayment and forgiveness:
- Direct Subsidized and Unsubsidized Loans
- Subsidized and Unsubsidized Federal Stafford Loans
- PLUS loans
- Consolidated loans
According to this plan, payments are fixed for 10 years in case of normal loans and for 30 years in case for Consolidation loans.
Graduated Repayment Loans
The same repayment and forgiveness categories applied to Standard Plan are available for Graduated plan as well. The borrower of student loan starts at a relatively lower interest rate and then get it increased gradually every two years. Compared to the 10-year Standard Repayment Plans, a borrower ends up paying more in this plan.
PAYE
This is a very friendly repayment program for those looking for forgiveness. The maximum monthly payment a borrower can make is 10% of the discretionary income. Every year, the monthly payments are revaluated and updated based on income and the number of members in the family, directly dependent on the borrower.
The student loan forgiveness for nurses is earned after 20 years of continuous monthly payment. For those who are married, the spouse’s income and loan debt is also considered, for tax deductions.
Revised PAYE
Any borrower with Direct Loan is eligible to choose this plan. It is preferred by the public unit servicemen seeking benefits from the established Public Service Loan Forgiveness (PSLF). In order to get entry in to the Student Loan Forgiveness program, the borrower should have applied on or after October 1, 2007. The receipt of disbursement of Direct Loan should be on or after October 1, 2011.
All Student loan forgiveness plans attract tax liabilities on the money earned. The above repayment plans only make the loans less burdensome and encourage education in the USA with a positive effect.
How to find the Right Repayment Plan for Your Student Loan?
American students pursuing higher education by taking loans have multiple options. But not all options are beneficial. In fact, some student loans can actually come as harsh step in the long run if availed from scrupulous creditors. Whether you are taking a federal or private student loan, there are both short-term and long -term implications. This is where Student loans forgiveness programs come handy. Before taking a loan, it is important to find ways of repaying them without hitting a roadblock.
Consider the following things before revealing your repayment plan on student loans.
- Time by which you will race and repay your entire debt
- Kind of job you have and the expense per month
- How you will link the debt repayment plan to your income
- Your credit score
- Kind of assets and liabilities you have now and might attract in future
A little predictive analysis of the situation five to six years from now after taking loans will help you actually leverage on the benefits of being covered under Student loan forgiveness programs.
Here are top repayment plans for those seeking quick forgiveness with guaranteed write offs in future from the creditors.
The Standard 10-Year Repayment Plan
Quickest way to get that credit blot out of your report is to make fast repayments against your student loans. You can save less on interest payments if you make chunk payments for a shorter period of time. This is why the Standard 10-year repayment plan serves well. When combined with the Obama Student Loan forgiveness for Public service workers, it proves to be very cost effective and also less burdensome.
For student loan borrowers who can afford slightly larger repayments than other plans spread over longer period of time, this is an apt program, especially with the fixed interest rate.
Tip: Get a stable job, preferably with a public sector organization and enjoy the perks of Student Loan Forgiveness for nurses, doctors and military.
Graduated Repayment Plan
It is a progression repayment where the payments start at an initial low value and then hiked every two years. It still also maintains the deadline of 10 year standard repayment, and ensures forgiveness in on the remainder sum. Since the repayment sum increases every two years, so does the interest rate.
Extended Repayment
With up to 25 years to repay the entire sum, it is easy on the budget for salaried professionals with modest income. Obama Student Loan forgiveness comes for borrowers who have USD 30,000 in Direct Loans availed after October 2007.
Income-Based Repayment (IBR)
Same as extended repayment, but the monthly repayment is capped at 15 percent of the discretionary income. It is automatically adjusted based on the income to ease the burden on paying for a long time. Federal Student loan forgiveness is applicable to borrower with partial financial hardship, ensuring that he/she enjoys more benefits than Standard plan.
All repayment plans are applicable to borrowers availing loans from Federal agencies.
Obama Student Loan Forgiveness 