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How Income-Based Repayment Can Help You Manage College Loan Debt

As many jobs require an associate or bachelor’s degree, you probably took out some college loans to cover education costs. Now you’re out in the workforce, but what you’re making just isn’t enough to cover your sizable monthly payments. If you borrowed federal college loans, income-based repayment can help you make payments without over-extending your budget.

What is income-based repayment?

Consistently paying student loans is critical to improving your credit score and avoiding default. Income-based repayment (IBR) adjusts your monthly payment down to a level that is more affordable based on your income and family size. IBR is only available for federal college loans, so any Stafford, PLUS and Consolidation Loans under Direct or FFEL programs are eligible. However, loans currently in default and PLUS Loans your parents took out cannot qualify for IBR.

How do I know if I qualify for income-based repayment?

You can use a student loan repayment calculator specifically designed for IBR to calculate your chances of qualifying. The calculator will take into account family size, the debt of your spouse (if applicable), the state in which you live, and how much you earn to determine if you qualify for IBR.

If the calculator’s output is lower than what you currently pay on a standard 10-year loan, you will be able to repay with IBR. If you are married, any debt your spouse has that is eligible for IBR will be combined with your eligible debt. If this total amount is lower than the standard combined payment, you both are eligible.

What about private student loans?

While private student loans are not eligible for IBR, talk to your lender if you’re having trouble making payments. You may be able to defer payments for a designated period of time, but interest will still accrue unless the loan is subsidized. Another option is forbearance; this postpones loan repayment while interest accrues. The unpaid interest will be added to the principal of the loan at the end of the forbearance period. That new total will then be subject to additional interest during the repayment period.

How to apply for income-based repayment or help paying for private student loans

For more information on income-based repayment, talk to the person servicing your federal college loans. If you’re not sure who that is, you can find the information at the Federal Student Aid website. When it comes to managing private college loans, speak to your private student lender to work out alternative options for paying student loans.

Sponsored content was created and provided by RBS Citizens Financial Group.

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