Great news for student loan debt holders who are struggling to pay those loans every month. Have you heard of the Income Based Repayment (IBR) program, or the “Pay as You Earn” plan? Well if you haven’t, you might want to listen up.

To give you a little history- the US Department of Education implemented an Income Based Repayment (IBR) program in 2007, which aimed to help borrowers pay off their student loan debt, relative to their earnings. However, the program wasn’t cutting it as the student debt number continued to rise to $864 billion in federal loans and most students out of college were landing low paying jobs.

The improved version of this program, also referred to as the “Pay as You Earn” plan, is designed to address this issue and will launch on December 21st, 2012.

This plan is designed to do two things:

1. Reduce the cap on monthly payments from 15 to 10 percent of discretionary income.
2. Accelerate the time it takes for students’ loans to be forgiven from 25 to 20 years.

Here is an example of potential savings with this improved plan for a household of 1 with an income of $45,000/year and $60,000 in loans:

To qualify for the “Pay as You Earn” program:

• You must have taken out a federal student loan after October 1, 2007 AND have taken out at least one loan on or after October 1, 2011 (Private student loans do not apply).
• Use the IBR calculator to determine if you are eligible for the Income Based Repayment Program.

The Department of Education estimates that at least 1.6 million borrowers qualify for the “Pay as You Earn” plan, but very few are aware that it exists, so spread the word and share this important information with your peers! Learn more about Income Based Repayment.

If you have had any issues with your federal student loans, you may be familiar with the Federal Student Aid Ombudsman office. This office is responsible for mediating issues with your federal student loans or financial aid office. Students weren’t lucky enough to have this luxury for private student loans, that is, until now.

The Consumer Financial Protection Bureau created a private student loan Ombudsman office to handle consumer complaints with loan lenders, servicers, and collectors.

What does it really mean for you, the borrower? Well, for starters, a single federal agency is now responsible for overseeing private student loans, which will hopefully provide easy answers to families seeking assistance. This new office will allow families to file complaints, at which point the office will contact the loan lender to help resolve any issues. These could be issues such as you were billed while loans were in deferment, or your payments were not applies as specified. The CFPB will now be able to help resolve loan repayment issues between you and your private loan lender.

While this office does handle complaints, they are also available to answer questions you may have about borrowing a private student loan. For more information or to submit a complaint or question, visit http://www.consumerfinance.gov/complaint/ or call 1-855-411-CFPB.

In a recent State of the Union Address, President Obama mentioned a Special Direct Consolidation Loan available to some borrowers with federal loans. This loan is not your typical Direct Consolidation Loan, and is only available for a brief period this year. This is a great opportunity for borrowers with the old, FFEL loans, as it will make managing repayment a much simpler task. Let’s take a look at how this loan works.

Background

First, let’s understand a little bit about historical student loans. Before Direct Loans came into play, the Federal Family Education Loan (FFEL) Program included four types of loans: Stafford, Unsubsidized Stafford, PLUS, and Consolidation. These loans, while still federally guaranteed loans, were made by private lenders and serviced privately. Now under the Direct Loan Program, federal loans are funded directly through the government (though there are four companies who service the loan on behalf of the Dept. of Education).
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I recently released my co-signer (my dad) from the burden of being responsible for my student loan payments. A co-signer is responsible for the payment of a student loan if the student who ‘owned the loan’ was unable to make payments, and deferment or forbearance wasn’t an option.

I thought this would be an easy, no ceremony (or notification) process needed. I didn’t realize how big of a deal this can be to your co-signer, the relief, and the adult-like responsibility you embody when you complete this process.
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Let’s face it, financial strategy and planning is not always on the forefront of college students’ minds. There is a lot of great information out there to help students budget while in college, but many busy students don’t have the time or will to read it. Enter Financial IQ Webinars by Great Lakes.

Great Lakes is a student loan servicer that is providing free webinars to students on financial literacy topics. Open to all students (not just those whose loans are serviced by GL) the webinars will focus on Money 411, Credit Card Smarts, and Student Loan Repayment – Everything you need to know.

For busy students, these hour-long webinars can be a relatively quick and easy way to get a little more finance-savvy. Below you can find a list of these webinars with dates, times, and more detailed information.
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Student loan repayment is a constant struggle for many students and grads. From working 2 jobs to cutting back on other expenses, repayment is no easy task. That’s why we’re bringing you some creative solutions to solve your financial woes.

1. Start cyber-begging

It’s becoming more and more common to see students start their own blogs and websites dedicated to soliciting donations for their student loan accounts. This is now known as cyber-begging. If you’re even a little web-savvy, this could be a great way to share your story with the world. Keeping a blog lets donors know how you’re progressing in your career, showing them they donated to a worthy cause – you.

2. Join an existing repayment site

If blogging or web development isn’t your thing, don’t sweat it. There are existing sites that do the grunt work for you. One such website it Lily’s List. Started by four mothers wanting to make a difference, this student loan gift registry allows people everywhere to donate to a student’s loan. There is a $15 membership fee, but well worth it for students with family and friends willing to donate.

Another website that offers a similar service is SponsorMyDegree.com. This website allows students and grads to either pay off their current tuition or repay their student loans through the donations of sponsors. Sponsors can be people you know, complete strangers, or even corporations. It’s free to register, so why not?
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Robert Applebaum has an innovative idea, one that has been gaining popularity nationwide since 2009. What if to boost the economy, we forgive student loans? A radical idea, but it’s an idea that has been adopted by congressman Hansen Clarke (D-MI) who recently introduced the bill H. RES. 365, but more on that in a minute.

Applebaum’s website “forgivestudentloandebt.com” is dedicated to providing information about this idea and inspiring people to join the movement. The thought behind this grassroots movement is to stimulate the economy by allowing people to spend more money, rather than using it to solely pay off debt. Here’s some background straight from the source:

“ForgiveStudentLoanDebt.com is a grassroots movement that began as a proposal authored by Founder, Robert Applebaum, entitled “Forgive Student Loan Debt to Stimulate the Economy”  which he posted to a Facebook group by the same name in late January, 2009… ForgiveStudentLoanDebt.com was founded so as to take this growing grassroots movement to the next level through lobbying, education and advocacy for a complete overhaul to the way higher education is financed in this country.”

Congressman Clarke’s bill has the same goal. The short version is that this bill seeks to eliminate personal finance burdens of Americans in order to stimulate the economy by alleviating debt. This not only includes student loans, but mortgages and other types of personal loans as well. To read the full bill text, click here.

While Student Loan Forgiveness is not a new idea, the wide-spread, federal implementation of it has been called an idealistic and unlikely approach to stimulating the economy. However, individuals wishing to support this movement can sign the petition at SignOn.org. Whether you support or oppose this idea, change can not be effected without your input; write to your congressperson to voice your opinion on this issue!

To learn more about other forgiveness and repayment options, visit StudentLoanNetwork.com.

And don’t forget to let us know what you think. Does this bill seem reasonable? Do you think it will or will not work? Leave a comment below to share your thoughts!

Now that graduation season is upon us, we asked students to share with us the amount of debt they have accumulated (and will soon need to repay). Here are the results of our poll:

It’s awesome, albeit surprising, to see the number of students graduating debt free- conGRADulations! For everyone else, loan repayment might be a growing concern as that 6 month date draws nearer. If you’re concerned about making payments for whatever reason, there are some steps you can take to either lower or postpone your repayment.

Consolidate

First, I would suggest consolidating your loans. Consolidation offers a number of benefits including lower monthly payments; Plus, it makes keeping track of multiple loans easier. To defer federal loans, you will need to contact the Department of Education Direct Consolidation department. To consolidate private loans, grads will need to contact a consolidation lender. Interested? Read more about consolidation in our blog, From our Archives: Consolidation.

Defer

If you are unemployed or do not make enough money to repay loans, I suggest looking into an Unemployment Deferment or Economic Hardship Deferment. Deferments allow you to postpone payment for a certain amount of time, allowing grads a little extra time to get on their feet financially. While available for most federal loans, deferment options vary by private lender, so make sure to ask if this option is available for you!

Here is a link to the Poll – Click Here and Show us your Debt!

If you could pay off your student loans by spending a few hours a week volunteering, would you? Well believe it or not, it’s possible. There are a couple of brand new organizations starting up that can help alleviate the burden of your student loans through volunteer work. Since the programs are relatively new, they are not yet nation-wide and are (or will be) based in Washington D.C., Dallas, TX and Pittsburgh, PA. These programs not only perform a service to people seeking student loan debt assistance, but are particularly noteworthy because they promote volunteerism and change within communities. The success of these pilot programs will be hugely influential both in local communities and for the millions of college graduates struggling to pay off their student loan debt.
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Graduate school is traditionally viewed as a way to facilitate getting into the workplace, as well as improving your career. But it doesn’t always work out that way. If you went to grad school and are still having difficulty finding a job and paying back your loans, you might feel lost. But there are options.

Federal Loan Deferment: If you are having difficulty making monthly payments for your graduate loan, one of the most common strategies is to apply for deferment. The Economic Hardship deferment allows you to postpone your payments and not have interest accrue on the subsidized portion of your loan. In order to qualify for this deferment type you must either (1)be receiving payment under a federal or state public assistance program, such as Supplemental Security Income (SSI) or Food Stamps; (2) serving as a Peace Corps volunteer; or (3) working  full-time with a gross income below minimum wage.

Forbearance: Federal loan forbearance is another option. The primary difference between forbearance and deferment is that anyone can receive it. By using the forbearance option, interest accrues on the principal and any capitalized interest. Your debt will continually increase while in deferment resulting in a longer repayment period.

You are allowed 36 months of federal loan deferment regardless of which deferment option you choose. You must reapply every 12 months in order to avoid being placed back in to standard repayment.