CliffsNotes Parents' Guide to Paying for College and Repaying... by Reyna Gobel

About $6.2 billion was disbursed in private student loans in 2012-13. Some students and parents turn to private loans to supplement or even replace federal loans. Parents can borrow the full cost of a child's education, while the student's federal student loan borrowing is typically limited to $31,000 for an undergraduate degree. In 2012-13, about 700,000 families borrowed nearly $10 billion under the parent PLUS program, which has minimal credit requirements, no underwriting to determine the borrower's ability to repay the debt and no cap on borrowing. Payments are capped at 20% of discretionary income with forgiveness after 25 years. Pay As You Earn has the same 10-year requirement for public service jobs but allows forgiveness after 20 years for other jobs.Ī third, less-generous option, the Income-Contingent Plan, is available for federal loan borrowers who do not qualify for the other two plans, including parents who shifted their PLUS loans into a direct consolidation loan on or after July 1, 2006. Borrowers with public service jobs can have their remaining balances forgiven after 10 years, while those in other jobs are eligible for forgiveness after 25 years. This program caps payments at 15% of discretionary income. Those borrowers are currently eligible for another, older program called Income Based Repayment, or IBR.

The expansion to borrowers with older loans is expected by the end of 2015. 1, 2007, and who received a federal loan disbursement after Oct. The program is currently only available to those who were new borrowers as of Oct. Pay As You Earn caps payments at 10% of the borrower's discretionary income, which is defined as the amount exceeding 150% of the poverty level for the household. Obama's executive order extends the Pay as You Earn repayment program to about 5 million more borrowers with older loans. 'You could really be struggling and still not qualify for one of these programs,' said Deanne Loonin, director of the National Consumer Law Center's Student Loan Borrower Assistance Project. Private student loans and parent PLUS loans are not eligible for income-based options, and borrowers with huge debt loads can be shut out if their incomes are too high. Some of the most burdened borrowers, however, will get little if any relief, financial aid experts said. President Barack Obama's expansion of an income-based repayment program offers additional help for millions of Americans struggling with federal student loan debt.

CliffsNotes Parents' Guide to Paying for College and Repaying... by Reyna Gobel