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Student loan borrowers to be notified of repayment options

Starting in October, the Department of Education will contact student loan borrowers who are struggling to repay their federal student loans to make sure they know all the options available to them. The department will start sending out emails to those who seem most likely to benefit from the programs. There are income based repayment programs that would benefit a lot of people but many are not aware of the programs. The department wants students to know of these programs before they end up defaulting on their student loans. 

Once enrolled in a program, low income borrowers with high debt pay a percentage of their discretionary income every month. After a certain time period, 20 to 25 years and 10 years for public service jobs, the remaining federal debt is forgiven. But the amount forgiven may be taxable, unless Congress acts beforehand.

Some of the income based programs are Income Contingent Repayment (ICR) which considers income and balance of the loan and Income Based Repayment (IBR) which bases the repayment on the borrowers adjusted gross income. The newest program is Pay As You Earn, (PAYE), effective 2012 which lowers the amount repaid from 15% to 10% of disposable income.

Some loans are ineligible for these income based repayments. Though the department believes low income borrowers may benefit the most, most borrowers can benefit from an income based repayment.

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