With the fall semester of 2010 coming up for students, recent changes to student loan programs are taking effect. One change has an income based repayment standard. This might reduce payments for students with debt. For student loans, new formulas and rules will help make higher education more reasonable for most.
Rates for student loans dropping
As of July 1, rates on a form of small loan subsidized by the government did drop. Rates for Stafford loans that have been subsidized dropped from 5.6 percent to 4.5 percent. Subsidized loans that originated before July 1, 2010 will maintain the same rate as before.
Changes to income based repayment
The changes to student loan programs that will have the biggest effect are all of the changes to income based repayment formulas. Numerous recent graduates are discovering that with a tough job market and banks with no money to lend, it’s practically impossible to make student loan payments. The income based 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.
Marriage penalty is then removed
For married couples who have two sets of student loans, the new income based upon repayment formula won’t penalize married couples. Combined loan payment amounts could be used to calculate eligibility as long as couples are likely to file their taxes jointly. Only a single money loan balance might be measured against total household income.
Current balance vs repayment balance
Income based repayment used to be calculated using the amount borrowers owed when they first entered repayment. Now, income-based repayment calculations will be calculated using the current amount owed. This will help reduce the load on students who have had loans in deferment, building interest without making payments.
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