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Save Money Now and In the Future with Student Loans

If you have student loans, now is the time to evaluate your loan program and look for options to save money right away and in the future. Two cost savings provisions of the College Cost Reduction and Access Act went into effect July 1, 2009 and are helping many people cut the cost of loan payments now, and plan for eliminating student loan debt in the future.

Income Based Repayments

The first thing to do if you have Federal Family Education Loans (FFEL) or Federal Direct Loans is to contact your lenders and apply for Income Based Repayments (IBR).  IBR payments are calculated on your (and your spouse’s) adjusted gross income from the previous tax year and your family size. If you currently owe more in student loans than you earn, you will, most likely, qualify for the IBR. One woman, with $45,000 in loans did qualify for reduced payments while earning a salary of $75,000. 

If you do not know who your lenders are, or what type of loans you have, visit the National Student Loan Data System at You will need your Social Security number and your four-digit FASFA pin in order to access your lender information.

Another great benefit of the IBR plan is the loan forgiveness.  After making payments for 25 years, the remaining debt is forgiven (you do not have to pay it). It does not matter what line of work you are in for this forgiveness program – the only stipulation, is that you have made payments for 25 years. At this time, the remaining amount of the loan that is discharged after 25 years is considered taxable income.

Public Service Loan Forgiveness

The second part of the College Cost Reduction and Access Act, implemented in July of 2009, is Public Service Loan Forgiveness. Under this program borrowers must make 120 qualifying loan payments to their lenders after which any remaining loan will be forgiven. Unlike the IBR forgiveness, the amount of debt discharged under this plan is not considered taxable income.

So, what are qualifying payments? There are four criteria and you must meet all four of them. To qualify, you must:

  1. Be employed for the government (local, state, or federal), a 501 (c) (3) non-profit agency, AmeriCorps or PeaceCorps.
  2. Be considered working full-time (an average of 30 hours per week per year).
  3. Be making payments on qualified loans. These are Federal Direct subsidized and unsubsidized loans, such as Stafford or Ford loans, GradPlus loans and Direct Consolidation loans. If you have FFEL loans you can consolidate those into the Direct Loans and still qualify.
  4. Make loan payments under an income-contingent plan (similar to the IBR, but only for Direct Loans), IBR plan or the standard 10-year repayment plan.

 It is important to note, that the 120 payments do not have to be consecutive and they do not have to be with the same employer. Also, if you are on an income contingent repayment plan or an income based repayment plan and your monthly payment is $0.00, these payments do count toward the 120 months of payments.

Even if you are not sure you qualify, take the time to contact your lenders and ask. Wouldn’t it be great to save some money now, and plan for eliminating those student loans in the future?

For more information visit or go to the Direct Loan Servicer Online at

Published Nov 24, 2009.