On July 1st the College Cost Reduction and Access Act of 2007 took effect. This act can reduce the monthly payment those who qualify for the Income-Based Repayment plan.
The qualifications are somewhat confusing at first glance but
start to fall in place once you plug in your income and loan
amounts.
What this means is that you can literally get a lower payment
without consolidating your student loans. You will have to fill
out some paperwork and substantiate your income and amount of
debt, but you don't have to worry about any credit issues.
There are a few "gotchas" in the College Cost Reduction and Access Act of 2007.
If you financed your education with private loans or if your
income is too high you are ineligible for the program. The base
line is that act limits monthly payments to 15% of earnings above 150% of the poverty line,
currently at $10,830 for a single-person household.
If you are working in the public sector, you are eligible for
additional benefits. This includes government employees, workers at public hospitals,
those who teach in public schools or universities, and employees
of any 501(c)(3) nonprofit organization. The biggest benefit is
that these employees can be forgiven their debt in 10 years
instead of the current 25 year limit. So 10 years or 120 payments
and you're done regardless of the total amount.
Of course you can't apply for forgiveness until you've
completed 10 years worth of payments so it won't help right now.
And, 10 years is a long time so anything might change. But it
still is an improvement for those who qualify. And if you have
taken a lower paying position, you can get your payments reduced
right now.
You will need to contact your lender and get an application to
file that will allow the release of their income information from the
IRS each year as it's filed. You can ask about any other available
programs at your lender to defer, reduce, or temporarily suspend
your student loan payments if you are in dire straits.
The purpose of the College Cost Reduction and Access Act of 2007
is to lessen the impact for the borrower and the government. Given
the current job market, many recent college graduates are not
finding jobs or taking jobs that are paying much less than
expected.
If you are having problems paying your student loans, and you
can't qualify for consolidating your student loans, it's a good
idea to contact your lender and see if you have any other viable
options. The College Cost Reduction and Access Act of 2007 can't
help everyone but it may help you now or in the future.
