New student loan repayment plan is based on borrower’s income
The federal program is complex and won’t apply to every borrower, but it could dramatically reduce monthly payments for some.
The 32-year-old father of two just graduated from architecture school with $125,000 in debt. He and his wife, an audiologist, expect to make good money someday — more than enough to pay the loans. But between the rotten economy and a new baby, the Savannah, Ga., couple have only been able to find part-time work. They’re struggling to make ends meet, so the $1,200 a month that Jeff’s lenders want on his loans doesn’t seem feasible.
Fortunately for the Zollingers, a new federal student loan repayment plan goes into effect this month that could dramatically reduce payments for highly indebted borrowers. Called “income-based repayment,” the plan limits the monthly payments to a percentage of the borrower’s monthly income.
