Feds offer cap on student loan bills

With the average senior at Ohio University leaving Athens with just over $16,000 in federal loans, according to the Office of Financial Aid and Scholarships, the federal government is handing many borrowers a break on their student-loan repayments beginning this week, thanks to a provision in the Cost Reduction and Access Act of 2007.

Beginning July 1, anyone with a federal student loan can apply for the income-based repayment plan, which will cap monthly payments at no more than 15 percent of one's income and forgive loans after 25 years. Additionally, those entering public service professions like teaching can have their loans forgiven after just 10 years of employment and repayment, as part of the act.

"This looks to me like a great deal," said Sondra Williams, OU's director of financial aid and scholarships. She added that while there have been income contingent repayment plans in the past, this is the first plan to allow the public-service forgiveness clause.

Loans eligible for the IBR plan include Direct Subsidized Loans, Direct Unsubsidized Loans, Direct Consolidation Loans, Direct Student PLUS Loans, Federal Family Education Loan (FFEL) Stafford Loans and some FFEL Consolidation Loans.

Parent PLUS loans and loans from private lenders do not qualify for the plan.

In order to qualify for the IBR plan, one must be able to demonstrate financial hardship. According to the IBR's application, "You are considered to have a partial financial hardship if the annual amount due on all of your eligible loans, as calculated under a standard repayment plan with a 10-year repayment period, is more than 15 percent of the difference between your adjusted gross income (AGI) and 150 percent of the poverty guideline amount for your family size and state."

For a single person, a yearly income of $16,245 is 150 percent of the federal poverty level. This number increases as the number of family members increases.

Jobs eligible for the public-service loan forgiveness (which does not require a showing of financial hardship) include non-profit, federal, state, local or tribal government, public education, military service, law enforcement and emergency management. Payments made after October 2007 count toward the 10 years of repayment necessary for the public-service loan forgiveness plan.

At all campuses of Ohio University, some 13,000 students took out subsidized loans totaling over $54.4 million for the 2008-2009 school year. More than 18,000 students have borrowed $58.6 million from the federal government using unsubsidized loans this year alone, according to Williams. These figures do not include what students borrow from private lenders.

Federal loans are the biggest program offered to help students pay for school, Williams said. With OU's annual tuition at $8,907 and out-of-state fees an additional $8,964 per year, these loan-repayment plans could help ease the pain felt as students enter the job market in the down economy.