The federal program is complex and won’t apply to every borrower, but it could dramatically reduce monthly payments for some.
The 32-year-old father of two just graduated from architecture school with $125,000 in debt. He and his wife, an audiologist, expect to make good money someday — more than enough to pay the loans. But between the rotten economy and a new baby, the Savannah, Ga., couple have only been able to find part-time work. They’re struggling to make ends meet, so the $1,200 a month that Jeff’s lenders want on his loans doesn’t seem feasible.
Fortunately for the Zollingers, a new federal student loan repayment plan goes into effect this month that could dramatically reduce payments for highly indebted borrowers. Called “income-based repayment,” the plan limits the monthly payments to a percentage of the borrower’s monthly income.