New opportunites for student loans
The federal government has presented a new, easier repayment plan for student loans, but it doesn't work for everyone.
The income-based repayment plan allows certain federal loan borrowers, based on their income in relation to their loans, to pay 15 percent of their discretionary income for 25 years, after which any remaining balance is forgiven. Discretionary income is considered the amount by which adjusted gross income goes over the poverty line, after accounting for family size.
The newer Pay As You Earn plan requires payments of 10 percent for only 20 years before forgiveness. Only those with Direct student loans, funded by the U.S. Department of Education, who had no loans before October 1, 2007 and got a new loan on or after October 1, 2011, can qualify for that plan.
The catch is that the amount forgiven can be large, and it will come with a big tax bill due immediately.
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