National Student Loans Interest Relief

With the rising cost of higher education in the United States, an entire generation of post-graduates have found themselves buried under a mountain of high-cost student loan debt. Since student loans are often not discharged in bankruptcies, borrowers often have little recourse but to choose between student loan payments and other essential expenses. However, in 2009, partly due to the credit crisis of 2008, the federal government instituted a new policy to help struggling borrowers.

Income-Based Repayment

The plan, called Interest-Based Repayment, or IBR, allows for an individual borrower to calculate a new monthly payment based on his income. This program is designed to primarily assist those living near or below the federal poverty level, or those whose income cannot support a decent standard of living.

Function

The IBR plan allows for reductions in monthly payments on student loans. The plan, however, does not eliminate any debts. Instead, borrowers are allowed to stretch their payments--in other words, extend the term of the loan--out further into the future. Essentially, the relief provided by the IBR plan is a short-term, temporary solution for struggling borrowers.

Calculation

Students interested in taking advantage of the IBR program must first calculate their new monthly payments. The federal government provides a payment calculator for potential applicants. See Resources for this calculator. The program sets minimum and maximum payments. These numbers are based on income but also on the number of people in the family. For example, a borrower with an annual income of $45,000 and a household size of four would never be asked to pay more than $149 per month toward student loans.

Benefits

The main benefit of the IBR program is, quite clearly, a reduction in the total outgo each month toward education debt. However, the psychological benefit is nearly as important. By allowing families and individual borrowers to climb out from under monstrous payments, the government's IBR plan gives hope and motivation to succeed, and repay debts in a more effective manner.

Eligibility

If you are a borrower with limited income and large student loan payments, it would behoove you to check to see if you are eligible. Although the government does not set strict eligibility requirements, it is simple to check using the calculator provided in resources. Also, many of the IBR programs are executed through private student loan lenders--like Sallie Mae--and borrowers must first consult with these lenders before applying for the program.