NDSU Extension - Sargent County

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Money for College

Money for College 5/26/17Seniors will be graduating from all three Sargent County high schools this weekend.  After graduation they will move on to life after high school.  Many will be going on to college, using student loans as a source of funding for their education. 

The world of student loans can seem overwhelming, and student loan debt in a real world reality.  A variety of student loan repayment options exist.  Borrowers should learn about the various repayment plans and choose the one that works best for their situation.

Two main types of repayment options are the traditional repayment plans and various income-driven repayment plans. 

Traditional repayment plans include the standard repayment plan, the graduated repayment plan, and the extended repayment plan. 

-  Standard Repayment Plan, the borrower pays a fixed amount every month for 10 years. 

-  Graduated Repayment Plan, the borrower has lower (smaller) payments at first and then the payments increase
   (usually every two years), with the loan being paid off in 10 years.

-  Extended Repayment Plan, payments can be fixed or graduated, but the repayment time  is 25 years. To choose this
   repayment plan, borrowers must have an outstanding balance of $30,000 or more.

Income-driven repayment plans set the monthly payment at an amount that is intended to be affordable based on the graduate’s income and family size.  There are five different income-driven repayment plans, each briefly described below.

-  Income Based Repayment (IBR) Plan - The monthly payment generally is 15 percent of the borrower’s discretionary
   income. For those who are not new borrowers (borrowed on or prior to July 1, 2014). The payment generally is 10
   percent of discretionary income for new borrowers (those who borrowed on or after July 1, 2014). The loan balance
   remaining after 20 years for new borrowers and 25 years for the not-new borrowers will be forgiven. The borrower will
   have to pay income tax on the amount forgiven.

-  Income Contingent Repayment (ICR) Plan - The monthly payments are calculated as the lesser of 20 percent of the
   borrower’s discretionary income or what would be paid on a fixed payment plan over 12 years. The loan balance    
   remaining after 25 years will be forgive, but the borrower will pay income tax on the amount forgiven.

-  Pay As You Earn (PAYE) - This plan caps payments at 10 percent of discretionary income. This plan is only for those
   who were borrowers after Oct. 1, 2007, and not have received a disbursement of a direct loan since Oct. 1, 2011. The
   remaining loan balance is forgiven after 20 years. The borrower will pay income tax on the amount forgiven.

-  Revised Pay As You Earn (REPAYE) - This plan is similar to the PAYE plan, but it is open to borrowers who have had
   loans at any time.

-  Income Sensitive Plan - This is only for Federal Family Education Loan Program loans, so new graduates who only
   have Direct Loans will not qualify for this plan.

To see what plan or plans you are eligible for, or to calculate monthly payments, visit www.studentloans.gov.  For more information about repayment plans, visit www.studentaid.gov.

Source: Carrie Johnson, NDSU Extension Service Personal and Family Finance Specialist

Photo Source:  https://pixabay.com/en/money-dollar-bill-bills-paper-money-860128/   (downloaded 5/31/17)


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