The income-based repayment calculations are now based on joint taxes, if you're married. Image from Flickr.
With the fall semester of 2010 coming up for many college students, recent changes to student loan programs are taking effect. Some of the biggest changes include an alteration of income based repayment standards. This help for graduates with student loan debt will reduce payments on this easy loan for some. New formulas and rules for student loans will, in the end, help make higher education more affordable for most.
Dropping rates for student loans
As of July 1, rates on a form of small loan subsidized by the government did drop. Rates for Stafford loans that have been subsidized dropped from 5.6 percent to 4.5 percent. Subsidized loans that originated before July 1, 2010, and unsubsidized loans will maintain the same rate as before.
Changes to income based repayment
The changes to student loan programs that will have the biggest effect are changes to income based repayment formulas. Many recent graduates are discovering that with a tough job market and banks with no money to lend, it’s nearly impossible to make student loan payments. This income based repayment recalculation adjusts the program introduced last year. The point of income-based repayment is to keep debt manageable for students who are saddled with huge loans and few job prospects.
Removing the marriage penalty
For married couples who have two sets of student loans, the new income based repayment formula will no longer penalize married couples. Combined loan payment amounts can be used to calculate eligibility as long as couples file their taxes jointly. Previously, only a single money loan balance could be measured against total household income.
Current balance vs repayment balance
Previously, income based repayment was calculated using the amount borrowers owed when they first entered repayment. Now, income-based repayment calculations will be calculated using the current amount owed. This will help reduce the load on former students who have had loans in deferment, building interest without making payments.
