With college tuition on the rise, many students are looking to student loans to help finance their education.

According to a U.S. News report 59.1 percent of the graduating class of Southeastern in 2010 borrowed to help finance their education. Their average debt was over $36,000. Unfortunately, the harsh reality of the debt taken out to pay for college is realized six months after graduation when the lenders come calling for loan repayment.  

President Barack Obama announced in October of last year a proposal to quicken the affects of a passed bill by Congress initially scheduled to go into effect in July of 2014. It will allow borrowers to decrease their monthly payments from the 15 percent currently allowed under the current Income Based Repayment (IBR) Plan to 10 percent of their monthly income as early as 2012.

“The IBR program will be beneficial to any student who is struggling to make the required monthly student loan payment,” said Mary Lacour, director of Financial Aid.

If a graduate qualifies for an IBR plan, the monthly payment will be an amount intended to be an affordable payment based on income and family size. The payment will be less than the amount required under a 10-year standard repayment plan.  While the major draw of this plan is the  lowered monthly payments for graduates, another benefit of the new IBR plan includes loan forgiveness for remaining balances after 20 years instead of 25.

The “Pay As You Earn” proposal intended to expedite the new changes is still undergoing the negotiated-rulemaking process. Students can take advantage of the current IBR Plan that is already in effect.

“All Stafford, PLUS and Consolidation Loans made under either the Direct Loan or FFEL Program are eligible for repayment under IBR, except loans that are currently in default, parent PLUS Loans (PLUS Loans that were made to parent borrowers) or consolidation loans that repaid parent PLUS Loans,” said Lacour. “The loans can be new or old, and for any type of education.”

Students should also be aware that reduced monthly payments under IBR increases the term of the loan and therefore the amount of interest paid over the life of the loan. Taken to term, interest payments could add up to a considerable amount more than a standard repayment term of ten years.  

“The faster you repay your loans, the less interest you pay,” said Lacour. “Because a reduced monthly payment in IBR generally extends your repayment period, you may pay more total interest over the life of the loan than you would under other repayment plans.”

Borrowers looking for more information on the Income Based Repayment Plan and whether it is the right option for them can visit www.studentaid.ed.gov/ibr or contact Southeastern’s Financial Aid Department at 985-549-2245.