HOUSTON -- The federal government has a new plan to help cash-strapped borrowers with their student loans. The plan is called the Income-Based Repayment Plan, or IBR.
The IBR plan uses your annual income as filed with the IRS, however if your income has fallen since you filed your taxes (for example, you have suffered a job loss), the government will accept documentation showing your income is not the same, according to the Department of Education Web site. The IBR plan also uses your income amount above the poverty line and number of dependents to calculate a new monthly bill for your student loans.
It is possible the new calculated amount will be zero. Under the plan, interest continues to accrue, so you don't want to stay on it longer than you need to.
"The assumption and the hope is that these people who get the relief from the program will ultimately earn more money and then be able to pay off these student loans," said LaVera Prestage, a financial advisor with Ameriprise Financial.
However, if your new IBR payment does not cover the interest accumulating monthly on your loans, the government may not charge you a portion of the interest, the Department of Education Web site states.
The IBR plan does not cover loans from private institutions, usually like those from banks. But it does cover Direct Loans and typically those from Sallie Mae and Stafford, to name a few. Your repayment amount will be adjusted annually and can go up or down, depending on your income, according to the U.S. Department of Education Web site.
The IBR plan does not cover student loans taken out by parents on behalf of their children, according to a Department of Education staff member.
To sign up for the plan, you have to authorize the Department of Education to get your income information from the Internal Revenue Service. Then you have to fill out forms and mail them in to the Education Department, and they will let you know your new monthly loan repayment amount.
Under this new plan, any loan amounts not paid back within 25 years can be forgiven. But the forgiveness time limit drops to just 10 years for those in public service jobs, Prestage and the Department of Education staffer said. Public service jobs include teachers, law enforcement officers, those in the military, those who work for the government, nurses and other health care workers, Head Start and early childcare workers, social workers, librarians and those who work for a non-profit agency.
To get enrolled in the student loan Income Based Repayment plan, go to: .
You may also try calling the Direct Loan Servicing Center at: 800-848-0979.