Obama's new loan plan?

[annie a]

Howdy,

I have heard a lot about the new loan program Obama is working on, however I understand it does not start until 2014. With this program, I understand that you will only pay 10% of monthly income? For all of those still thinking about going into debt for Columbia, this would be great if it started now. Also - does anyone know any details regarding the arrangement at Columbia where social work students - if they work in either the nonprofit or public sector - only have to worry about it for ten years and then the remaining amount is forgiven? That's pretty doable!

Edited April 6, 2010 by annie a

[tem11]

Howdy,

I have heard a lot about the new loan program Obama is working on, however I understand it does not start until 2014. With this program, I understand that you will only pay 10% of monthly income? For all of those still thinking about going into debt for Columbia, this would be great if it started now. Also - does anyone know any details regarding the arrangement at Columbia where social work students - if they work in either the nonprofit or public sector - only have to worry about it for ten years and then the remaining amount is forgiven? That's pretty doable!

While these may very well be great programs, I would be reluctant to rely on them still being around in a decade or so. There were many loan forgiveness programs at the state level when I entered college (2005) and nearly all of them are no longer in existence. It's great if they're around and you can benefit from them, but I certainly wouldn't undertake loads of debt with the assumption they'll be there. Especially in this economy.

First of all, the public service loan forgiveness as well as the income based repayment plans are ONLY FOR FEDERAL LOANS (emphasis added ). So any private loans you take out for Columbia are not eligible, just the 20,500/year for federal loans + any federal undergrad loans.

As for the loan program that begins in 2014, it's really not that different than the current one. Current income-based repayments allow you to make payments adjusted to your income. It's now set at 15% of your income and in 2014 it will be down to 10%, so it's not really a huge difference. If you qualify, you'd have lower monthly payments, but you'll accrue a LOT more interest in that time. Right now, if you make income-based repayments for 25 years, they'll be discharged. If you're in a public service profession, it will be discharged after 10 years. This is not Columbia specific, it applies to everyone with federal loans. However, these programs are all very recent and the kinks haven't been worked out yet. As of now, there's no formal application process for public service loan forgiveness since no one is eligible for it yet (law was passed in 2007 or 2008? So no one can really discharge until 2017-2018 at the earliest). It's really a wait and see game as to how efficient and reliable it is.

The biggest catch is that income-based repayment (where you pay 10-15% of each monthly check) is based on your family's income, not just yours. My husband makes decent money and therefore I'm ineligible for the program.

In short, read the fine print and certainly don't rely on these programs being around in ten years. If you won't be able to make the monthly payments without the assistance of these programs, you probably can't afford grad school right now (I mean that in the nicest way!). Here's a good calculator that gives you a better idea of your payment options:

http://www.ibrinfo.org/calculator.php

Good luck .