July 7, 2009
In Iowa's Interest: Five New Ways to Lower Your Student Loan Bill
In Iowa’s 2007 graduating class, 73 percent of our college graduates – almost 3 out of 4 – entered the job market with student loan debt. Each of these young adults owe an average of $26,208 – the highest rate per graduate in the nation. That’s a lot of money for a young person to shoulder as they try to land their first job, especially in this economy.
Students seeking a college degree shouldn’t have to resign themselves to the lifelong burden of debt. Last week, a new law aimed at lowering the cost of a college education went into effect. The bill makes five important changes, all of which are designed to ease the burden on student borrowers.
- The new Income Based Repayment (IBR) plan caps monthly federal loan payments based on the income and family size of the borrower, and forgives all debt and interest that remains after 25 years. IBR is an option for most federal loans – past, present, or future- made by any lender. It is applicable to college and graduate school loans, and borrowers who owe more on their federal student loans than they earn in a year will benefit most.
- Through the Public Service Loan Forgiveness Program, borrowers who work in government, nonprofit, or other public service careers can have their remaining debt forgiven after 10 years of repayment (and the 10 years of service do not have to be consecutive).
- For borrowers with variable-rate loans, lower rates can now be locked in. Any unconsolidated Stafford loan taken out before July 1, 2006 has a variable interest rate that resets each year. The variable rate has been lowered to 2.48%. Borrowers can now lock into this rate by consolidating variable-rate loans.
- The New Student Loan Repayment Plan also lowers the cost of federal student loans. Interest rates for subsidized Stafford loans will be lowered from 6.0% to 5.6%. Stafford loans are typically for families making under $80,000 a year and accrue no interest while the student is in school.
- The maximum amount given in annual Pell Grant awards has been increased from $4,731 to $5,350. Pell Grants are need-based grants from the federal government and go mostly to families with incomes below $50,000.
Americans shouldn’t have to take on a lifetime of debt to finance their dreams. Contact your student loan provider today to take advantage of these new plans.
Federal Student Aid:
Direct Loan Servicing:
Toll free: 1-800-848-0979
Direct Loan Consolidation:
Toll free: 1-800-557-7392
National Student Loan Data System (NSLDS) for Students: