New rules for Income-Based Repayment of student debt make repayment easier

The Obama administration changed the rules for “Income Based Repayment” (IBR) of student debt in 2010 and more students have begun to take advantage of this system. Undergraduate students who elect this form of repayment can apply it to as much as $31,000 worth of debt. (Those in graduate schools can borrow even more.) Instead of making payments based on interest rates, graduates pay 10% of income above a base living amount, every month, for 20 years. Anything left over after that time is forgiven.

There’s even a better deal if you go to work in a non-profit or into government service. As
the New York Times reports, “Take, for example, someone who finishes a bachelor’s degree with the national average of $29,000 in debt, and borrows another $13,000 for a master’s degree in education. The new graduate goes to work as a schoolteacher at a starting salary of $35,000, which grows to $50,000 after 10 years. Under IBR, the monthly loan payment will start at $117 and never rise above $200. The teacher will pay only $18,360 in total on the loans, and $48,840 in principal and accumulated interest will be forgiven after 10 years.”

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