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msilverstar

News on student loan debt relief

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May. 19th, 2010 | 09:59 am
mood: determined

A friend of mine has gigantic student loan debts, and I want to help so I did a little research and found a newish law which implements Income-Based Repayments so there's a limit to how painful they will make your monthly payments:

Income-Based Repayment (IBR) caps monthly federal loan payments at an affordable level based on your income and family size. If you owe more on your federal student loans than you earn in a year, you can probably benefit from IBR. The lower your income, the lower your monthly payment will be: in some cases, as low as $0. IBR is available for almost all federal loans http://studentaid.ed.gov/vo/students/.

Essentially, they can set it up so you don't have to pay more than 15% of your income if you are working, maybe nothing but accruing interest if you are unemployed or broke. If you repay under the IBR plan for 25 years and meet certain other requirements, any remaining balance will be cancelled (from StudentAid.ed.gov).

More information: IBRInfo.org - tons of info, including an animated video (!) and a repayment calculator, and a May 2010 New York Times series Answers About Student Loans.

Better things to come from the new new education law attached to HCR in March; no surprise, it passed with no support from Republicans. No more publicly-supported private loans any more, and as of 2014 new loans will set future repayment amounts limited to 10% of income, forgiveness after 20 years. USA Today and NY Times

For people with lots of different loans and private loans, start by looking at government debt consolidation options. Right now, if you have private loans and a nasty bank, you are screwed: you can't even discharge them through bankruptcy, and the interest just keeps piling on. However, there are bills in Congress to limit unfair practices and fraud, and limit repayment burden, including bankruptcy protection. These are being pushed by Obama and the Democrats, of course. For more, see the Project on Student Debt

(my links go to legit sites -- there are ugly scams out there: good advice from the feds)

ETA: National Student Loan Data System - see how much you owe, and to whom. I'm glad that's available, it's clearly worth filling out the forms.

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Comments {15}

Tiny Mimosa

(no subject)

from: magickalmolly
date: May. 19th, 2010 06:08 pm (UTC)
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This is wonderful - thank you so much for the information!

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Lotripper

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from: msilverstar
date: May. 20th, 2010 01:09 am (UTC)
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you are welcome, I really hope it helps!

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fairywriter

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from: slashfairy
date: May. 19th, 2010 06:10 pm (UTC)
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oh bless!

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Lotripper

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from: msilverstar
date: May. 19th, 2010 06:44 pm (UTC)
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I really hope it helps!

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juke_box_dive

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from: juke_box_dive
date: May. 19th, 2010 06:20 pm (UTC)
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Good information! To add, borrowers of federal student loans can look on the student portal access of the National Student Loan Data System to learn exactly how much they owe and who their lender(s) are. Helpful for consolidation considerations and in light of some of the more recent changes in legislation that have, in some cases, made it impossible for students to maintain one lender. We've had students this year who have as many as three different lenders as lenders begin to drop out due to the economy, the government PUT program, which allowed lenders to sell FFELP loans to the Feds in order to generate capital in the student loan market, and, more recently, due to the change that compels all schools to switch to Direct Loans.

Also, a question. I'm not sure what you mean by "no more publicly supported private loans." Do you mean private education loans, which still exist and are not/have not been publicly supported, or are you referring to the dissolution of the Federal Family Education Loan Program (FFELP, which most know as the Stafford Loan Program)? There is a definite difference, especially in terms of where the money is coming from, the interest rates, fees, etc.

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Lotripper

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from: msilverstar
date: May. 19th, 2010 06:43 pm (UTC)
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Oh, that was silly of me, I should have asked you first.

I was trying to explain the change: "Congress voted Thursday to force commercial banks out of the federal student loan market" (NYtimes). Could you explain it to me please?

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juke_box_dive

(no subject)

from: juke_box_dive
date: May. 19th, 2010 06:53 pm (UTC)
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What they mean by "federal student loan market" is that the FFEL program has been eliminated, forcing all schools (and thus all student and parent borrowers) to go through the William D. Ford Direct Loan program. [Though I use "force" this, to me, is not a bad thing. I have long been in support of the Direct Loan program and worked towards our school going in that direction since I took over this department, which we decided to do a year before legislation forced the issue.] Commercial banks can no longer provide Stafford Loans, PLUS loans or Consolidation Loans after June 30, 2010.

Commercial banks can (and will) still provide private educational loans, which we consider the last line of defense for students who have no other options. These can't be consolidated with the federal loan programs, have fees, and generally have variable interest rates, which are bad, bad things. The private loans come from the lenders own source of funding rather than being subsidized by the government, which was what was happening in the FFELP world. There is legislation out there now that would force lenders to seek school certification before students receive these loans, which would, in theory, lower debt burden.

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(no subject)

from: auberryroad
date: May. 19th, 2010 08:09 pm (UTC)
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Ooh, thanks for this!

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Lotripper

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from: msilverstar
date: May. 25th, 2010 06:15 am (UTC)
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I thought of you when I was doing this research! I hope it works out for you.

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kara_belle23

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from: kara_belle23
date: May. 19th, 2010 08:48 pm (UTC)
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Thank you for this...I am graduating soon and paying back my loans is what scares me the most.. :S

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Lotripper

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from: msilverstar
date: May. 25th, 2010 06:17 am (UTC)
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you are welcome, and I hope your school has some resources: use them!

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eff_reality

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from: eff_reality
date: May. 19th, 2010 09:36 pm (UTC)
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Thank you SO MUCH for this. I'll be spending a lot of time with it tonight...

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Lotripper

(no subject)

from: msilverstar
date: May. 25th, 2010 06:18 am (UTC)
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You are totally welcome! Once I did the research, I had to share. Good luck!

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<3.14

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from: apple_pi
date: May. 19th, 2010 11:31 pm (UTC)
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Good links. I feel sad when I see our students (at a community college, no less) racking up the debt like crazy without a thought for what it will mean for their future. I always try to steer them toward grants, scholarships, ANYTHING, but so many are so blase about it... Ugh.

Off to look at my own student debt and sigh, again... :-p

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Lotripper

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from: msilverstar
date: May. 25th, 2010 05:28 pm (UTC)
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Could you take advantage of some of these changes? I hope so.

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