Federal plan lowers monthly loan rates for grads

A new federal program will allow students with federal loans to lower their monthly payments based on their income.

The Income-Based Repayment, or IBR, plan will allow borrowers to correlate their payments with the amount of money they’re making. This will allow graduates who are making less money to spend less per month on their federal loan payments.

Federal loans include Stafford and Perkins loans. The program was announced by the U.S. Department of Education on July 1.

Jane Glickman, spokeswoman for the Department of Education, said the plan will make it easier for graduates to repay their student loans.

“People are taking large amounts of money out to go to college and graduate school, so this is a way to link payments to their income,” she said. “It makes it easier for people who want to be teachers, or police or go into the Peace Corps, or something that may not make a lot of money,”

In May, Rick Shipman, MSU’s director of financial aid, said of the students who leave MSU with debt, the average owes about $20,000.

Val Meyers, MSU associate director of financial aid, said the plan will help graduates pursue their interests rather than a job they might only take for a higher salary.

“I think a lot of students become conscious of the debt they have — they may take a job they don’t want or that doesn’t fit their degree because they feel the pressure,” Meyers said. “This, in the long run, will give students leeway to go after their passions.”

The plan also will make it easier for people to go into public service jobs, which might pay less than other options, she said.

In order to be considered for the lowered rates, graduates have to apply through their respective lender. They would then have to reapply every year to compensate for possible changes in income. Consideration for the IBR isn’t automatic; graduates have to contact their lenders for specific application information, Meyers said.

Although monthly payments will be lower, interest still will accrue and could make the loans under the plan more expensive, Meyers said.

Communication sophomore Christina Henderson said although the plan might help, it has some drawbacks.

“I think it will be less beneficial in a way because you pay more in the end,” she said. “But it could even out.”

If the graduate never gets a higher paying job and after 25 years hasn’t paid the loan off, the remaining amount is forgiven, Meyers said.

The program was authorized by the College Cost Reduction and Access Act, which was passed in September 2007, Glickman said in an e-mail.