Help for student-loan debt may be on way

By now you've probably seen countless articles offering helpful tips on how to cut costs and save money in a recession: Bring your lunch to work! Change your own oil! Cut your own hair!

It's all good advice (assuming you know how to cut your own hair), and lots of people are doing these things already. But if you've trimmed all the fat from your budget and that monthly student loan bill is still tipping the scale, get ready for some good news. Two new government programs could save you some serious money and lower your monthly student loan payments.

The first new program is Income-Based Repayment: a new repayment option for federal student loans, which became available July 1. It caps monthly payments at an affordable level based on your income and family size, and forgives any debt and interest that remains after 25 years.

That means if you're underpaid, underemployed, or just plain unemployed, your student loan payments won't break the bank. If you owe more on your federal student loans than you earn in a year, you probably qualify. The lower your income, the lower your monthly payment will be: in some cases, as low as $0. Income- Based Repayment covers almost all federal loans - past, present, or future - made by any lender, whether for college or graduate school.

The second program is called Public Service Loan Forgiveness. If you work in a government, nonprofit, or other public service job, you could have your remaining student loan debt forgiven after just 10 years of Income- Based Repayment, or certain other payments. Your loans have to be in the federal Direct Loan Program to qualify, but the 10 years don't have to be consecutive. You just need to make a total of 120 payments while working fulltime for a public or nonprofit employer, starting on or after Oct. 1, 2007.

Public Service Loan Forgiveness can make it possible for people with significant amounts of student debt to take low-paying but important jobs in teaching, social work, rural medicine, legal aid, and other fields that often require years of expensive schooling.

These programs are only available to people with federal student loans. Private or "alternative" student loans, PLUS loans for parents, and consolidated loans that include PLUS loans are not eligible for these programs.

More information about Income-Based Repayment and Public Service Loan Forgiveness is available at www.IBRinfo.org. The site has a simple calculator you can use to estimate your eligibility and monthly payment, and answers to many frequently asked questions.

By all means keep packing your lunch (and maybe even cutting your own hair) and save every penny you can, but check out Income-Based Repayment and Public Service Loan Forgiveness for a chance to save thousands of dollars on your student loans.

¦

Lauren Asher is Acting President of the Institute for College Access & Success, an independent, non-profit organization working to make higher education more available and affordable for people of all backgrounds. For more information, visit www.ticas.org.