If you have used any form of student aid to pay for your education, odds are you may be struggling to make ends meet and make a payment on your student loans, even after graduating. If you are in this category, you most likely did not get the job you thought you would upon graduating, and if that is the case, you have plenty of company these days.
Student aid payback is one of the largest collections problems in the United States today. Tough laws have been passed in recent years that support creditors efforts to collect student aid debt. The 2005 Bankruptcy Abuse Prevention and Consumer Protection Act is an example of such laws. This act added private student aid loans to government student aid as debts that are no longer discharged by filing bankruptcy.
Nevertheless, there is some good news for those of you who have used federal student aid in obtaining a degree or some type of certification, but cannot make a payment on the loan because you are either under employed or cannot get a job. Your government is not without compassion concerning your financial predicament in not being able to pay back your loans as fast as you thought you might. They have provided you with a plan to pay back your loans.
Some of you may qualify for the Income Based Repayment Plan (IBR). This Federal Government plan provides for those of you who are temporarily not where you thought you would financially be at this point in your life in order to make a payment.
The IBR is a plan for the major types of federal student loans that caps your required monthly payment at an amount intended to be affordable based on your income and family size.
Advantages of the IBR
You can pay as you earn, and your monthly payment amount will be less than the amount you would be required to pay under a 10-year standard repayment plan.
There is a built in protection for paying interest. If your payment does not pay the interest owed on the debt, the government will pay for the interest up to 3 years.
If you repay under the IBR plan for 25 years and meet certain other requirements, any remaining balance will be canceled.
If you work in a public service full time, all on-time and full monthly payments you make under IBR will count toward the 120 monthly payments required to receive loan forgiveness through the Public Service Loan Forgiveness Program.
Disadvantages to the IBR
Since this plan is slower in paying, interest may accrue faster, so, you may end up paying more interest over time.
Any interest or principal forgiven under this type payment may be subject to income taxes.
Since you are required to submit annual documentation, any failure to do so in a timely manner could result in you having to make standard payments again.
Obtaining student aid has become a must situation for many of you wanting to improve your education. Loans are a large factor for people who eventually go into bankruptcy and no longer are able to afford daily living expenses. You may want to consider your options for paying back student aid because you cannot discharge the debt with a bankruptcy filing.
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