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Kelci Lynn Lucier

Good News About Your Student Loans

By January 7, 2013

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For years, students who had federal student loans could use the Income-Based Repayment (IBR) plan if they were earning low wages or if their payment took up an overwhelming percentage of their income. The main idea: since you're earning less right after you graduate than you (hopefully!) will earn later, your loan payment amount is based on your income, not the standard repayment plan where your payment amount stays the same for x number of years.

There is now another option for students who took out their first federal student loan after September 30, 2007. A new program, called the Pay as You Earn plan, operates on a similar principle as the IBR plan. However, it has a lower monthly payment maximum limit and offers a forgiveness option after 20 years (in contrast to the 25-year time line for the IBR plan).

Before scheduling any kind of student loan repayment plan, it's important to understand things like how much you'll pay in interest over the life of the loan and how long you'll be making payments under the plan you select. For more information, head to studentloans.gov or talk with your financial aid office.

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