With student loan debt exceeding the trillion dollar mark, student loan help is needed more than ever before. The good news is that a piece of legislation was approved, that allows federal student loans to now be consolidated through the Department of Education. The legislation is called the William D. Ford Act.
The student loan consolidation programs include income and hardship based plans that may also lead to debt forgiveness. Today we will take a closer look at these options and by the time college graduates are done reading this; they will be pointed in the right direction.
The Standard Plan
The first program is called the Standard Student Loan Consolidation Program. This program often sets up students with the highest monthly payment when compared to the other plans, because of the fact that their loans will be paid off in the fastest time-frame, and they must be paid off in full. On this plan a student has 10-30 years to pay off their loan.
The Graduated Repayment Plan
The second plan is called the Graduated Repayment Plan. On this program a person will start out with a low payment, and that payment will gradually increase every two years. This program is good for the college graduate who has their career locked in, but will start out with making a very low income. Their monthly payment on this plan will never be less than the amount of interest that accrues between payments. On this plan a person has up to ten years to repay their loan.
The Income Based Repayment Plan (IBR)
The third plan is called the Income Based Repayment (IBR) plan. This program can significantly lower a person’s monthly payment. A person’s monthly payment on this program is based on their family size and income. This program is great for a person that has a hardship situation and low income. The best part about this student loan consolidation program is that after 20 years of making their payments, the rest of their loan could be canceled and a person would no longer have any other payments. If a person works in public service, after ten years of payments on the IBR plan, the rest of their loan could be forgiven.
The Income Contingent Repayment (ICR) Plan
The fourth plan is called the Income Contingent Repayment (ICR) Plan. This plan is based on a person’s gross annual income, family size and what their total student loan debt amount is equal to. Each year a person’s income will be re-evaluated and they must get re-approved for the right program. This plan has lots of flexibility. The maximum repayment period on this program is 20 years. If a person has not paid off the entire loan by 20 years, the unpaid portion of the loan will be discharged.
To get approved on these student loan consolidation programs, the paperwork and procedure can be complex. It is very easy to get set up on the Standard Plan, and not approved on one of the income based plans, where a person’s monthly payment would be higher than it potentially should be. On top of that, it is often required that a person must get re-approved annually. If any of the paperwork or timing of getting everything submitted is off or has an error, a person could get kicked out of the program.
The only student loans that are not eligible for consolidation are loans made by a state or private lender (not backed by the federal government), Primary Care Loans, Law Access Loans, Medical Assist Loans and PLATO Loans.
Companies such as Golden Financial Services are available to assist consumers with getting set up on the right student loan consolidation program and re-approved annually, making the process easy.
Paul Paquin is the CEO at Golden Financial Services. Paul has been involved in the debt relief industry for 10 years and has done extensive research in this field. His company strives to offer the most effective debt relief program on the market.