The federal government will launch a new Income-Based Repayment Plan
Student debt plans more forgiving on borrowers
Marisa Schultz / The Detroit News
Borrowers drowning in debt will have two new options to manage their federal student loan burden starting in July.
The federal government will launch a new Income-Based Repayment Plan that would limit loan payments to typically 10 percent of a qualified borrower's income. After 25 years of payments, the remaining debt would be wiped clean.
Under another loan forgiveness program, remaining loan debt of public service employees would be eliminated after 10 years of employment and payment. Workers for any nonprofit, tax-exempt organization or for the government should qualify.
"This could not be coming at a more important time for student loan borrowers who need relief," Lauren Asher, acting president for Project on Student Debt, said of the new programs.
More students are borrowing, and they are borrowing more. On average, two out of three graduates of four-year colleges leave school with debt, averaging about $21,000 in loans.
Student debt is increasing faster than starting salaries for new graduates. While average student debt at graduation rose by 6 percent between 2006 and 2007, earnings for 18- to 24-year-olds with bachelor's degrees rose only 3 percent, according to the Project on Student Debt, which along with other nonprofits created the site www.ibrinfo.org to help spread the word about these new options.
"We are actively urging the department (of Education) to gear for what is likely to be a large number of applications," Asher said.
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