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Student Loan Repayments Linked to Income

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student-loan-repayments-linked-to-incomeStarting July 1st, 2009, student loan repayments will be limited to 15 percent of a borrower’s discretionary income or 15 percent of the amount that a borrower’s (and spouse’s if applicable) adjusted gross income exceeds 150 percent of the poverty line, divided by 12.

If  you’re still paying the college loan off after 25 years all unpaid interest and principal are capitalized and any outstanding loan balance is forgiven.  Student loans that have been made on behalf of a dependent student and Direct Consolidation Loans that contain PLUS loans are not eligible for the income-based repayment program.

The bill gradually cuts interest rates on subsidized Stafford loans for undergraduate students in half according to the following schedule:

  •  6.8 percent for loans first disbursed July 1, 2006 to July 1, 2008
  • 6 percent for loans first disbursed July 1, 2008 to July 1, 2009
  • 5.6 percent for loans first disbursed July 1, 2009 to July 1, 2010
  • 4.5 percent for loans first disbursed July 1, 2010 to July 1, 2011
  • 3.4 percent for loans first disbursed July 1, 2011 to July 1, 2012

These new changes are part of the The College Cost Reduction And Access Act signed into law on September 27th, 2008 by President Bush.

The National Association of Student Financial Aid Administrators has put together a more detailed analysis of the student loan income based provision of the law.


Author: Brian McKay
June 30th, 2009

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