Monday, July 19, 2010

Changes to student loan programs make repayment easier for numerous

With the fall semester of 2010 coming up for many college students, some of the recent changes to student loan programs are taking effect. Some of the biggest changes include an alteration of income based upon repayment standards. This might reduce payments for students with debt. New formulas and regulations for student loans are likely to, in the end, help in making it more affordable to seek out higher education. Source of article – Changes to student loan programs make repayment easier for some by Personal Money Store.

Dropping rates for student loans

July 1, the rates on a form of small personal loan subsidized by the government dropped. Rates for Stafford loans dropped from 5.6 percent to 4.5 percent. Subsidized loans that originated before July 1, 2010, and unsubsidized loans will maintain the exact same rate as before.

Repayment changes for income based payment

The changes to student loan programs that will have the biggest effect are changes to income depending repayment formulas. Many recent graduates are discovering that with a tough job market and banks with no money to lend, it is nearly impossible to make student loan payments. The income depending repayment recalculation will change the program that was introduced last year. The point of income-based repayment is to keep debt manageable for students who are saddled with huge loans and few job prospects.

Removing the marriage penalty

For married couples who have two sets of student loans, the new income depending repayment formula won’t penalize married couples. Combined loan payment amounts can be used to calculate eligibility as long as couples file their taxes jointly. Only a single money loan balance could be measured against total household income.

Repayment balance vs current balance

Previously, income depending repayment was calculated using the amount borrowers owed when they first entered repayment. Now, income-based repayment calculations can be calculated using the current amount owed. This will help reduce the load on former students who have had loans in deferment, building interest without making payments.

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