Trimming Student Loan Debt

Student loan debt often exceeds a graduate's ability to pay. Especially when students aiming for five-figure salaries in public service take on six-figure debt. Erin Wheeler, for example, wants to work in international reproductive health, but her program at Columbia could cost her $100,000 over two years. How can she hope to pay that back with a prospective career that typically pays only $40-50,000 per year?

The good news is that in 2007, Congress recognized that there were so many students in Wheeler's position that it passed the College Cost Reduction and Access Act. There were two programs established by this act that Wheeler should look into, two advisers said.

The first is the income-based repayment plan, which allows lower-income graduates with a lot of debt to reduce their monthly payments. Depending on a graduate's income and level of debt, the program, which goes into effect July 1, could limit his or her annual educational loan debt repayment to 15 percent of discretionary income, said Peter Mazareas, vice chairman of the College Savings Foundation, a Washington-based advocacy association.

The second is the public service loan forgiveness plan, in which the federal government will forgive the remaining debt of borrowers who make 120 loan payments while working full time in public-service jobs. The graduate must have a Federal Direct Stafford, PLUS, graduate PLUS, or Federal Direct Consolidation loan.

Source: The Boston Globe