Best Debt Companys

166 Companies 2,736 Real Customer Reviews

The Cost of Student Income-Based Repayment Plans

Posted By:  |  August 20, 2015  |  0 Comment(s)

In a recent article on The Atlantic, writer Mikahail Zinshtenyn asks who is responsible for picking up the graduate student debt? This may not be a top question on minds of student borrowers, although it is a rising cause for concern among tax payers.

According to the U.S. Department of Education we are seeing newer government programs allowing student loan holders to become enrolled in an income-based repayment plan. Statistics show that these plan types have skyrocketed to more than 50 percent since last year alone, with 3.9 million borrowers signed up as of this June.

lead_960

These income based repayment plans have been around since the early 90’s only we are beginning to see a rise in enrollment as of a few years ago. While these plans may help student borrowers slash their monthly payments, this leaves taxpayers coughing up what is left should student loan forgiveness come into play.

When looking into how these plans work, typically the borrowers will show cause with statements of income to debt ratio. Depending on which program is selected, the borrower may be allotted a 25 year repayment plan, again, all based on income. Should the entire amount borrowed, with interest, not be paid within the time frame the remaining debt will be “excused.” While this plan can be rewarding to the borrower, it is the federal government who will absorb the remaining amount – meaning this will cut into taxpayer’s gross funds, which is the real concern.

Although the federal government places limits on the amount an undergraduate may borrow – $57,000 for independent students and $31,000 for dependants – the stipulation is set that grads take only what they will need for the cost of attendance, including living expenses and tuition. This results in graduate students needing the least amount of relief, such as bachelor’s holders, the best option to pay their debts entirely without forgiveness.

According to The Wall Street Journal graduate school loans account for 40 percent of the entire $1.2 trillion in student debt, although a mere 14 percent attend a graduate school program. In their report they state that in the past decade the percentage of borrowers has quintupled to around 2 million, with individual debts exceeding the $100,000 mark.

Recent data posted by the Department of Education found that are 41 million borrowers overall in the United States repaying loans, with $200 billion signed up through an income based repayment program. Roughly half of the programs participants are graduate school students. A comment made by Jason Delisle, and education analyst at the New America think tank, said, “It makes sense.” And “They enroll because they need it.”

The Obama administration and think tanks have made a recent rule extending the loan repayment period from 20 to 25 years for many graduate student borrowers, but also forgiving a portion of the funds borrowed. For example, there is a federal program that will provide $150,000 of loan forgiveness to those who attend Georgetown Law, Delisle mentioned.

With the Consumer Financial Protection Bureau pointing out the struggle of the initial application process to these loan programs, the Obama administration have proposed to closing some of those loopholes in the near future.

Poll

  • How important is it to you for a debt consolidation company to offer financial education resources?
  • Takes your existing debt and try to settle with your creditors for a lower amount. If you pay off the settled amount, your debt will be considered paid in full.
  • Negotiates with your creditors on your behalf.
  • Fee based on a percentage of your total starting debt or a percentage of the debt they save you.
  • Most settlement companies have you create a separate "escrow" account where you will make monthly contributions over a certain amount of time to contribute to your settlement. Once there is a substantial amount of funds to show your creditors, the settlement company will try to negotiate a lower amount of debt.
  • Combines all your debts and creditors into one monthly payment.
  • Allows you to pay one monthly payment to the consolidation company, instead of multiple payments to different creditors.
  • You no longer owe your original creditors; instead you pay one monthly payment to your consolidation company.
  • Consolidation companies can help negotiate lower interest rates on your debts and help lower your total debt payment in the long run. A lower interest rate will lower the amount you owe in the end.
  • Allows you to consolidate all your different debts into one personal loan that can be paid off over time.
  • Can offer borrowers a lower interest rate with a longer payback term (compared to high-interest credit cards or medical bills). This will lower the amount of money required to pay off the loan over time.
  • Personal loan debt consolidation can be an effective way to raise your credit score quickly (within 3-6 months).
  • Borrowers can receive funds from their loan within only a few days.

Recently Reviewed:

Trending Blog Post:

Want us to review a company?

If there is a debt company that you don't see on our site, and would like us to review, please contact us.

Real Reviews (yes they’re real)

With so many debt relief companies out there, and a lack of sites willing to bring you the HONEST breakdowns of each company, what source can you turn to for the real information you can trust?

We are dedicated to bringing the truth out, and rank debt relief companies as they should be. Through our investigation, and experience with each company, we rank each company, and bring you our honest, unbiased opinion. We also include authentic user reviews by past customers of each company that are moderated and verified.

Like many sites, we are compensated through affiliate relationships with each company we review, however all of our rankings are based on our 11-Point Ranking Criteria.

All reviews are subject to moderation and approval. Any reviews that may resemble false information, or competitors of another company will need to be verified by our staff before being approved and published. We reserve the right to approve or deny any reviews left on this site.