Student Loan Options

Saw this piece recently from the Baltimore Sun's Eileen Ambrose...or as we get here in the Chicago paper, "a Tribune Co. Newspaper." She outlines several options in the piece, including some that have been recently enacted by Congress. If possible keep or get your loan from the federal government, not a private lender. Take a look here if you need to consolidate private loans into a federal, direct lending loan. Also, a new student loan resource from the National Consumer Law Center.

Four options from the piece:

• Income-contingent repayment

Once you're in the direct lending program, you can ask for this borrower-friendly plan. Lower-income borrowers can reduce their monthly payments and debt remaining after 25 years of payments is erased. Payments are 20 percent of discretionary income. That's defined as the amount of your adjusted gross income that exceeds the poverty level. For a single person in Maryland and most other states, the poverty level was $10,210 in 2007. If you're at the poverty level or below, your payment is zero, Kantrowitz says. And if your income stays at the poverty level for 25 years and you never make a payment, the balance would be forgiven, he says.

• Income-based repayment

This new option, which takes effect in July 2009, is more generous. Payments are 15 percent of discretionary income. And in this case, discretionary income is income exceeding 150 percent of the poverty level. Again, you don't have to make a payment if your income falls below that. Unpaid balances after 25 years are forgiven.
You don't have to be in the direct lending program to be eligible.

• Public service forgiveness

This new program helps those entering fields that we value in society, but underpay. That includes police, school librarians, social workers and government and nonprofit employees.
You must make 10 year's worth of on-time payments while working in public service. After that, remaining debt is forgiven. The clock starts with payments made as of last October. Your loans must be in the direct lending program to qualify. Under the standard schedule, student loans are repaid in 10 years. This benefits those making smaller payments using income-contingent or income-based repayment plans.

• State help

Check your home state for programs that help reduce student loans.