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Financial Conversations with Fitz #20 - College Loans Without Income - 05/26/2009

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Wow, A great weekend for weather and some more graduation activity.   Great program at the Civic on Monday morning.  The soil is back to 65 degrees.   Most of the crop is in the ground.   Some spotty areas for growth…..The rain should help that or maybe a little replant.

Today we are going to talk about making College Payments without a job!!!!!!!   What a deal.  The national college debt is $22,000.   Our Iowa average is $26,000.   You know if Harry has $26,000 and falls in love with Sally with $26,000.   They are starting out with a huge debt to service.    If they start out making less than $60,000 together they will have a 9.8% cap.   I know I had two different employees once that were making Less than $30,000 but their payments were $6,000 annually.   Heard briefly about this but had trouble chasing down the program.   It is certainly something for our recent college graduates to look into, particularly if they are working part time for minimum wage.  It is called Income-Based Repayment or IBR.   It starts July 1, 2009.  It will help borrowers keep their loan payments affordable with payments caps based on their income and family size.  For most eligible borrowers, IBR loan payments will be less than 10 percent of their income—and even smaller bor borrowers with low earnings.   IBR will also forgive remaining debt, if any, after 25 years of qualifying payments.  This program is only available for federal student loan borrowers.  Unfortunately doesn’t qualify for Parents Loans.  They are several loan criteria and formulas built into the program.    There is a neat calculator in the website to see how you stack up.  You can end up with $0 payments.  Unless you end up in one of the higher brackets you payments can be capped at 10 percent of your income.  What about interest?????  Sometimes your payment will not cover the interest.   That can be deferred for up to three years.   Anything you owe will be forgiven after 25 years.  You will need to give your student financial aid officer a call to check on all your loans that qualify.  

Another neat feature of the program is Public Service Loan Forgiveness for borrowers that work in certain kinds of public service jobs and non profit 501 (c )  (3) organizations..  It will forgive remaining debt after 10 year of eligible employment and qualifying loan payments.  We had this back in the 60’s and 70’s called National Defense Loans.  This would involve teaching or gov’t jobs the way it looks.  One of the programs I know that qualifies is the AmeriCorp job.  I know I worked with them in Cerro Gordo when I was in Extension.  I know the DNR has hired quite a few in Iowa using this program.  It is a one year program where you make a stipend wage with benefits.  Then at the end of it they pay up to $4,725 to apply to your college debt.  So how do I check this out?   Check the web site at www.IBRinfo.org.   Give us a call at any of our offices for help also.

More information about these new programs can be found directly at the IBR Info's What are These New Programs page.

Remember that you should deal with people in community banks and organizations  that when they put something together for you that they will  be sitting with them at ball games, church or community events.  So, if in doubt give us a call.