Financial aid counselors are encouraging those in need of student loans to consider a new program introduced by the federal government.
The Income-Based Repayment program is similar to taking out a direct or guaranteed loan from the federal government until it is time to pay off the debt. Instead of fixed rates, borrowers reimburse the lender based on their income.
Rates do not exceed 15 percent of a borrower’s monthly income, but most should end up paying less than 10 percent, according to Project on Student Debt, a nonprofit organization in Berkley, Calif.
Paul Palin, spokesman for the Illinois Student Assistance Commission, said the program is significant because it keeps creditors from harassing graduates if they are unemployed.
“You never know what your situation is going to be,” Palin said. “It certainly is one of the repayment options offering tremendous benefits.”
The program also forgives outstanding loans after 25 years of on-time payments, or if a borrower has held certain public service jobs for 10 years.
Applications became available on July 1, but Palin said students might not be aware the program exists.
That was true for Cassie Cronenwett, a sophomore from New Berlin studying marketing. Cronenwett said she expects to owe the government about $20,000 by the time she graduates.
She said she receives most of her financial aid advice from her older sister, who graduated from the university and relied on student loans as well.
“It’s so confusing,” Cronenwett said. “All I know is that I have to pay it back.”
Cronenwett said she hopes to pursue a career in sports marketing, but is skeptical about job availability. If she were to sign up for a loan under the program, she would not have to worry about making student loan payments until she has income.
Bobby Patton, a senior from Chicago studying English, said he keeps up-to-date on financial aid options, but was still unaware of the program. Though he is close to graduation, Patton said the program could be something he considers for graduate school.
Palin said it is important for graduates to keep their lenders informed on their employment and monthly income.
“I think it’s pretty significant for students,” he said, “You’re paying back on what you can afford to pay.”
On the web: Find out if you qualify for Income-Based Repayment at http://www.ibrinfo.org/calculator.php
Daily Egyptian reporter Barton Lorimor can be reached at 536-3311 ext. 263 or barton.lorimor@siude.com
