Student Loan Forgiveness - New Federal Student Loan Repayment Plan Offers Debt Relief Hope

Crushing student loan debt is hammering college graduates. Student loan defaults are soaring toward new records. College loan borrowers have called for debt relief. But now President Obama has proposed faster government-backed loan consolidation and loan forgiveness plans to help borrowers repay their college debts and give a boost to the American economy.

President Obama's decision to expand education loan forgiveness to more students now could very well mean that loans you took out to pay for college may get much easier to handle. Details of his new "Pay As You Earn" program, outlining new rules for repayment, are still emerging.

Loan consolidation at a lower interest rate is the main objective of the plan. Three major features of the plan benefiting college graduates struggling to make their monthly educational loan payments are:

Repayment Term

Each loan that would be consolidated retains its original repayment term. Thus, borrowers will pay less interest over the life of the loan than they would under the traditional consolidation programs.

Interest Rate

A fixed rate (not to exceed 8.25%) after applying the 0.25% interest rate reduction to qualifying loans being consolidated. Lower interest rates means more of the monthly payment pays off the principal balance.

Electronic Debit Payment Benefit

Those who take advantage of this new consolidation plan are eligible for an additional 0.25% interest rate reduction if their loan is repaid through the Department of Education's automatic debit system.

The loan consolidation program will only be made available during a 6-month window, Jan. 2012 through June 2012, so borrowers need to act fast.

The government wants those people holding both private and government student loans to be allowed to consolidate their debts right now into one new government loan. Such a move could slash their interest rates, and save them money in the process as the federal government speeds up roll-out of an income-based repayment program that was originally slated to begin in 2014.

College graduates would still be responsible to keeping making payments on their loans, but those revised payments would be capped at just 10% of their income.

And, best of all for those who borrowed tens of thousands of dollars to finance their college education, their loans would then be forgiven after 20 years.

It is still not entirely clear how many students the new law is aimed at helping; estimates range from 450,000 to upwards of 6 million.

When Congress passed the Income-Based Repayment Plan (IBRP) in 2010 -- the new law which drops the monthly payment to 10% of discretionary income and would forgive all college student debt after 20 years -- there was a long waiting period before it became a reality; it was originally not set to go into effect until 2014. Now, the new terms would take effect in Jan. 2012.

Low-income borrowers would benefit the most. If a student loan borrower qualifies, then monthly payments are based only on any income above 150% of the poverty line ($16,335, the current 2011 U.S. poverty threshold.)

For a graduate living on their own, IBRP payments would be based on what he or she earned over this $16,335. Moreover, if the graduate is unemployed and has no income at all, then no monthly loan payment would be due at all.

Although it is unclear how this monthly reporting would be done, this new debt relief plan still represents a positive step forward toward resolving the debacle affecting untold numbers of college graduates who are struggling to make their college debt repayments. More detailed information on how to get student loans forgiven, visit FindHow2.com.

Steve Johnson is writer and publisher of FindHow2.com, offering hundreds of free articles on credit restoration, debt reduction, and personal financial management. One of the most popular recent topics at FindHow2.com includes a review of new student loan forgiveness incentives to help lower monthly payments for graduates paying off education loans.

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Use the Government or Go Private for Those Bad Credit Unsecured Student Loans

Noodle cups and empty wallets are pretty typical for the average college student. Finances are tight. These times are also when students are offered lots of credit cards. Talking about a way to get into high debt, this is it. Often the bills go unpaid and lots of students are already developing bad credit histories and digging themselves into a financial hole while they really are not aware of what is going on. Before taking any of these financial hurdles, you must first gain a financial education.

Federally Backed Student Loans

There are many federally funded student loans for which you can apply. Of course, you may not qualify for all of them. But for those that you do, this is the best way to fund your education. These government unsecured loans have very low interest rates, the have agreeable repayment terms, and payment is deferred until your studies are finished. To find these loans, talk to your financial counselors at your school or do a search on the Web. You will be asked to fill out a Free Application for Federal Student Aid (FAFSA). It is an overall application for government sponsored student funds.

Private Lender Student Loans

If you cannot qualify or do not want to go with government loans, there are other options. Banks or credit unions offer unsecured loans for many uses, student expenditures among them. You are not obligated to use these loans in any specific way. You can use them to consolidate your debts, like all the credit cards mentioned above, pay your living expenses, or whatever is crucial at the time.

Hard to Get

One of the bad things about using banks or credit unions for these unsecured loans is that they can sometimes be difficult in terms of qualifications. And they put you in a larger pool of borrowers who want unsecured loans. Banks and credit unions only have so much to lend. You may be a riskier client than other loan seekers. This is the riskiest type of loans for banks and credit unions, so their requirements are rather high and interest rates can be high, too.

Show Some Collateral

If you cannot qualify for one of these private loans, it may make a difference if you have something valuable to offer to secure the loan. This will make you a better risk and more attractive to a lender. Is your late model car paid off. You might be able to use it for a $5,000 loan. Another thing about offering security of this type is that your interest rates can drop significantly. That is a good thing!

Options, Options, Options

Many places exist that offer bad credit student loans. Most of them can be found on the Web. You know the Web, do you not? Of course you do. While you are surfing, check out the sites for student loan lenders. Pick out five or six who offer the best rates and the most comfortable repayment terms and see what each can do for you. You might want to use a broker. That way your information only has to be submitted once and the broker will come up with a list of lenders who would be most willing to lend to you depending on the financial information you have imparted. This way your credit history only takes one hit. Too many hits on a credit report over a short period of time makes lenders think you are desperate for credit and therefore too risky to lend to. The main thing to do while you are a student is to keep your credit scores as high as possible while still getting the funds you need to keep in school.

Mark Venite is the author of this article and a successful financial advisor with 20 years of experience. He helps people to get approved for Bad Credit Personal Loan and Student Loans with Bad Credit. For more information about his services please visit him at AccessMyLoan.com

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What's the Difference Between Getting a Federal Student Loan and a Private Student Loan

Attending school is a milestone because it can get really expensive. With some options already in mind, you should look at the student loan alternatives that are accessible to a college undergraduate. Educational loans can be very tricky, and are very confusing to most. In many situations, families are accepted for all different kind of loans and then are left in the dark when it is time to pay it back or do not realize that they owe as much due to accrued interest. With high interest rates and very unforgiving payment plans, it is advisable to really know what options are available to you prior to being seduced by college lenders with promises of fast money.

You could already be somewhat familiar with the terms 'Federal Student Loan' and 'Private Student Loan'; these are the two most popular types educational loans being used today. Do not allow the terms to deceive you, as they don't sound completely different, they come with very different stipulations and payment approaches in terms of how the money should be repayed. An educational loan is anything that is aided to the student or their family from the government or school the student plans to attend. These loans the student will pay back with interest at a later date.

A federal education loan is a specific type of loan that is aided to the student from the federal government; this enables the student to loan what the student needs financially. There is no need to pay the money back until the student has graduated from college or has otherwise decided to stop attending school. This loan can be used for books, transportation, moving costs, or a variety of other scholastic needs. When trying to get this loan the student may even find out that they are entitled to grants they were previously unaware of.

There are a number of different lenders that would certainly try to provide a loan. This is done to make money off interest and fees. It is the student's job to weed out bad loans and discover federal student loan providers that do not charge outrageous interest rates. Federal educational loans are typically the smaller loan amounts given to students and generally have a more relaxed repayment plan.

A private educational loan is a way more popular loan because these loan out much higher lump sums. This loan is provided to the student if they qualify after applying (to the lender of their choice). The money requested is commonly given to undergraduates in a large check but tend to contain hidden charges and exorbitant fees to repay. Generally, 3% to 4% in fees matches 1% interest rate. A private student loan is more difficult to get and has more complex repayment terms. The only reason a student should try for a private student loan is if they have maxed out the federal student loan amount and have hardly any other alternatives.

Due to comprehending the difference between a federal and private student loan, students can better prepare themselves for the eventual repayment terms beforehand and fully focus on their college experience.

Michael Saunders is an editor of TopGovernmentGrants.com. He maintains Websites providing resources on grants for non profits and grants for small business.

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