Beginning July 1, 2009 some college graduates can get lower loan payments.  The College Cost Reduction and Access Act of 2007 included the Income-Based Repayment Plan (IBR).  The IBR calculates monthly payments on student loans based on a person's income and family size.

The program will be open to graduates with a Stafford, Graduate PLUS or consolidation loan made under either the William D. Ford Federal Direct Loan or Federal Family Education Loan programs. The loans could be for undergraduate, graduate or professional studies as well as for job training.

NOTE: Loans that are currently in default, parent PLUS loans and consolidation loans that include a parent PLUS loan don't qualify.

This plan is good for people who are earning a lot less than they thought they would be at this point.  Generally, you'll qualify if you owe about as much in federal student loans as you make annually.  And for people who make less than 150% of the federal poverty level, the monthly payment, which is recalculated annually, would be $0 until their salary increases.

NOTE: Lower payments extend the life of the loan, so the overall interest paid on the loan may be more in the long run.

To start contact your student loan provider or servicer.   The Department of Education has more information and a calculator that estimates monthly payments, at studentaid.ed.gov.  You can also check out the Project on Student Debt for more info. 

After 25 years of qualifying payments, the principal loan balance may be forgiven.  Loan payments made under the standard 10-year repayment plan also count toward the 25-year requirement. Time granted for hardship loan deferments counts as well.

Additionally, people in the IBR plan remain eligible for the Public Service Loan Forgiveness Program, which forgives loan balances for people with Direct Loans who work in the public sector for 10 years.  Click here for details.

ABOUT YOUR CREDIT
We see many credit reports with student loans that show delinquencies or late payments of 60, 90 and 120 days.  The client knows the loan was in deferment or forbearance with no payments due, so it couldn't be late.

Turn your deferment and forbearance paperwork in on time and follow up to be sure it was received and processed.  Otherwise, you run the risk of it being categorized as delinquent and it can have negative consequences for your credit rating.

If you move, remember to notify the lender of your student loan so that they can send the appropriate paperwork to you when it's due.