For people still saddled with federal student loans (the average debt these days is a hefty $23,000, a 24% increase since 2004), there’s a new program that could save you a huge chunk of money. The Income-Based Repayment (IBR) plan which became available last July, offers payment caps based on income and family size. For most borrowers, that amounts to less that 10% of their income.“It’s a sliding scale based not on how much you owe but on what you can afford,” says Beth Kobliner, author of Get a Financial Life: Personal Finance in Your Twenties and Thirties (Fireside).
Right now IBR is best for couples who file their taxes individually: A husband and wife each making $30,000 a year and owing $30,000 in student loans would have to shell out only $170 a month per person. That’s about half of what they’d be paying under a standard repayment plan, freeing up more that $4,000 a year for the family.
But the plan gets even sweeter come July, when the same provisions will be extended to married couples who file jointly. To learn more, check out ibrinfo.org or finaid.org. They also offer program where you could qualify to not have to pay off any remaining debt after 25 years—or just 10 years for teachers, government employees and nonprofit workers.
(Jean Chatzky, author of Money 911: Your Most Pressing Money Questions Answered, Yorur Money Emergencies Solved (Harper Collins).
(Jean Chatzky, author of Money 911: Your Most Pressing Money Questions Answered, Yorur Money Emergencies Solved (Harper Collins).
