Federal Financial Aid: Income-Based Student Loan Repayment
New financial aid plan makes student loans for paralegal and criminal justice degrees more affordable.
We all know that a college education isn't free. But a 2009 federal government program makes federal financial aid for secondary education more affordable than ever before.
This student loan repayment program is called "income-based repayment" (IBR), and it is designed to ensure that students are not burdened with unreasonable debt after graduation.
IBR can help many criminal justice and paralegal students get an education at a cost they can afford.
Do I Qualify for the College Student Loan Repayment Program?
This plan is designed to assist people whose federal financial aid loans are high relative to their salary. The amount you pay under the IBR plan takes several factors into account:
- Your income
- Your family size
- The region you live in (Alaska and Hawaii have a separate calculation)
If the amount you'd pay under the new plan is lower than the monthly payment under a standard student loan, then you are eligible for IBR.
Your student loans can be new or old, and for any type of education (certificates, job training, undergraduate or graduate). IBR even works for loans for online education, such as online criminal justice degrees.
Income-Based Repayment Plan Benefits
If you are eligible, using IBR to pay back your student loans offers several benefits:
- Your monthly payments are based on your family size and what you earn, and the total monthly payment is capped at 10 percent of your income.
- The federal government will cover your loan interest for the first three years of repayment, if you can't. Interest is added to the principal after that three-year period.
- After 25 years, the government will cancel the remainder of your federal student loan.
- If you work in public service, your debt under the Direct Loan program will be forgiven after 10 years.
The Downside of Income-Based Repayment
Income-based repayment for federal financial aid is not for everyone, and it requires some diligence on your part:
- You must send documentation to your lender every year.
- A longer repayment period means you will pay more cumulative interest.
- Debt balances forgiven after 25 years of repayment are taxed as income. (This is not true of public-service loan forgiveness.)
- Married couples where both spouses have federal student loans will owe twice the amount of a single debtor, if the couple files their taxes jointly.
How to Maximize Your Income-Based Repayment Plan
To get the most of IBR, keep the following things in mind as you apply for federal financial aid:
- Finance your education with federal loans; they are the only ones covered by IBR. Federal loans include Stafford, Grad PLUS and Consolidation loans.
- As much as possible, stay away from private loans; they are not eligible for income-based repayment.
- Apply for Direct Loans: they are required if you pursue public-service loan forgiveness.
- Do your research: Learn the difference between monthly payments under income-based repayment and a standard 10-year loan; if the difference is small, you will pay less with a standard 10-year plan.
For more information on the income-based college loan repayment plan, visit the U.S. Department of Education's IBR website.
Student and Financial Aid Resources
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Undergraduate Students
Scholarships: Undergraduates get thousands of scholarships each year. Apply now!
Stafford Loans: With low fees and good payback terms, Stafford loans are the most common student loan.
Private Loans: Private loans are also very common. To reap the maximum benefits, parents and undergraduates can both apply.
Graduate Students
Scholarships: Professional associations, schools and the federal government offer many graduate financial aid scholarships. If you're going to grad school, find out more.
Stafford Loans: Stafford loans are federally supported and offer easy terms to qualified individuals.
Grad PLUS Loans: Grad PLUS Loans are especially designed for grad students.
Private Loans: Concerned about accruing more credit card debt by returning to school? These loans will ease your financial burden.