Income-Based Repayment for Student Loans
July 3rd, 2009 · debt & debt repayment · No Comments
The Federal Student Aid site has put together a great page on their new Income-Based Repayment Plan. Income-Based Repayment (IBR), is just what it sounds like–a repayment plan for federal student loans that caps your minimum based on your income.
Which Loans are Eligible for Income-Based Repayment?
According to the site:
Any Stafford, Grad PLUS or Consolidation loan made under either the Direct Loan or FFEL program is eligible for repayment under IBR, EXCEPT loans that are currently in default, parent PLUS Loans, or consolidation loans that repaid a parent PLUS Loan.
How do I Enroll in Income-Based Repayment?
If you check out the IBR page and think you’re eligible (you can use the calculator to find out), contact the people holding your student loans directly. Let them know what you’ve found, the results the calculator gave you, and discuss your options.
What Does Income-Based Repayment Look Like?
The IBR page has a sample chart and a calculator which you can check out. Here are some sample numbers from the chart:
For a family of two with an AGI of $50,000, the max monthly payment would be $352. For a family of 1 making an AGI of $20,000, the max monthly payment would be $47. For a family of 4 making $35,000, it would be $24.
What Are the Advantages of Income-Based Repayment?
This biggest advantage of being in IBR is that you should get a monthly payment you can afford. For some people, this will make a huge difference, especially if they have a large student loan for a low-paying job. It’s not the same as a deferment, as you do have to pay the monthly amount you’re assigned.
However, as with some deferments, the government will cover the interest accruing if it is not covered by what you’re paying each month. This only lasts 3 years–after that, as long as you’re under the IBR the interest will be added to the total of your loan.
Other advantages of being in the IBR program are a) a 25-year cancellation–if you can’t pay it off in 25 years, your loan ends anyway and b) a 10-year public service loan forgiveness–details available in this PDF.
What Are the Disadvantages of Income-Based Repayment?
There are two downsides to using IBR. One isn’t so bad–if you’re in the IBR program you have to prove your eligibility every year. Small price to pay for paying less.
The second is that IBR lengthens the period you’re paying your loan (after your IBR eligibility ends) because you’ve paid off less of the principal while you were making reduced payments. Therefore you also pay more in interest, even if all your interest was covered by the government while you were in the IBR plan.
Even though it lengthens the time and the amount you pay, this plan may be a lifesaver. When asking your loan holder about it, ask about the possibilities of paying more each month and having it applied to the loan’s principal. If that’s not an option, try putting aside your budget snowflakes and extra money you can put toward loans in a special savings account and make one mass payment toward principal once you’re out of the program.
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Fiancés Combining Finances
July 1st, 2009 · marriage & relationships · 8 Comments
Recently, another blogger was asking on Twitter for our opinions regarding his fiancée's suggestion that they combine their finances. Since the wedding was not for another year, my answer was emphatically no, even if they were living together. If they were getting married in a month, I'd probably still have said no, but agreed that they should look into how they were going to combine their finances if they planned to do so after they married.
Since I hear of so many couples keeping their finances separate even after marriage, I kept thinking about his question and my biggest reasons for saying no. Many small reasons occurred to me, these two big reasons apply to any couple and are something every couple (especially those without the legal protections of marriage) should consider before combining finances:
Week 4 PF Blogger Weigh In
June 30th, 2009 · life & miscellany · 1 Comment
This June & July, a number of PF Bloggers are participating in the PF Blogger Weight Loss Challenge, organized by Baker of Man vs. Debt. I'm participating by increasing my strength training, since I don't need to lose weight.
Since Baker's gone halfway around the world, we team leaders will be posting the results on a shared spreadsheet and taking turns publishing them on our blog. As Gamma team leader, it's my turn--though I'm a little late because I was out of town.
Get Laid Off: Start a Business? - Guest Post
June 29th, 2009 · alternative income & freelance, books & book reviews · 2 Comments
The following article contains condensed excerpts from $100K to Nothing – Layoff: My journey from a six figure income to the unemployment line in the worst economy of our time by Dan Holt. You can find out more about the book at www.100ktonothing.com.
I was laid off earlier this year, and like the 14.5 million other unemployed Americans, am having a tough time finding a new job; any job, let alone one that compensates me as well as the one I lost. I’ve read Mrs. Micah’s articles since December 2007, and watched as she grew her income by working part-time in a hospital, a library gig, freelance writing, editing and quilting, and later expanding into freelance blog design. Now, as she has a full-time job, she is cutting back on those side projects to balance her life.
7 Tips for Talking to your Fiancé About Money - Guest Post
June 26th, 2009 · marriage & relationships · 5 Comments
Micah & I are headed off to a wedding this weekend, so here's an appropriate guest post with 7 tips for talking to your fiancé(e) about money. I advise couples to start talking early, because you'll form your own ideas of your marital finances and they may differ greatly.
Money is one of the biggest things that couples fight about. Many of those fights come about because a lot of us just don’t know how to talk about money. Financial issues are going to be a topic of discussion throughout your entire marriage. Because of this, you should learn to talk to your partner about money even before you tie the knot.
Some tips that you should follow for talking about money with your fiancé include:
Keep Your Word to Children About Money
June 24th, 2009 · personal finance & money management · 9 Comments
When I was much younger, about 10-years-old, my younger sister and I created our own little business. We called it a Paper and Mail Service and had a little rhyme that we wrote on our fliers, "We get your paper and mail each day while you're away."
It wasn't a huge source of income since we didn't market it outside our little neighborhood. But it helped us save up for periodic purchases of fun stuff like walkie-talkies and used books and it made us feel useful.
Our business lasted a couple years and for the most part I'd consider it a success. There's still one incident, however, which stands out in my mind in stark contrast to the warm fuzzies I feel about the whole endeavor.
