New Program for Repayment of Federal Student Loans
Student Loan options are few and far between for those with more debt than they can afford. Bankruptcy options are also quite limited for those in districts setting the “undue hardship” hurdle too high. Before we get to the light at the end of the tunnel student loans in many respects are the worst kind of dent to have for the following reasons:
- VERY difficult to discharge in bankruptcy
- No statute of limitations
- The government may garnish your wages or social security income
Now the good news: There is a relatively new program called the Income Based Repayment program. Visit www.ibrinfo.org for details. This program is for those with certain Federal Student Loans. Those who will benefit the most include those in public service and government jobs such as teachers. For those who qualify they may be able to become debt free after 10 years of reduced monthly payments. Individuals without a public interest or government job face a 25 year repayment program and a potential tax bill for the unpaid portion. As you can see, the program is mainly designed to help those with public interest jobs.
As many of my clients are unaware of this relatively new program it is worth investigating for anyone with sizable student loans.
Jason Witt
Thanks, Jason. As you note, those in public service have much to gain, but borrowers with high student debt relative to their incomes would be wise to consider the benefits of IBR, including a 3 year interest subsidy. Income-Based Repayment can be a great option for lots of student loan borrowers who would otherwise consider alternative ways of reducing their monthly payments, for example by choosing an economic hardship deferment or an extended repayment plan. I recommend all financially distressed borrowers compare IBR to the other available options before making a decision, as the choice is very borrower-specific.