Marvin Scott Jarrett

Finance Blogger

Know Your Repayment Plans

September 4, 2013 // by admin

When deciding on going to college, one of the most important things you’ll need to consider is how you’ll pay for it. If you’re like most people, the answer is through taking out a payday loan online from a money lender. With graduation seeming so far away, it can be easy to lose focus on just how you’ll pay off your personal loans in Singapore. One of the most important things to consider before getting an education loan though, is the method you’ll choose to repay it.

One method you may qualify for is Income-Based Repayment (IBR). IBR is a repayment plan made under the William D. Ford Federal Direct personal loan Program. If you are eligible, your monthly payment would be no greater than an amount deemed affordable based on your income and the size of your family. This will automatically be less than what you would pay under a ten year standard repayment plan.

Another method to consider is known as ICR-A (formerly, President Obama’s Pay As You Earn Initiative). In this plan, annual payments will not exceed ten percent of your “discretionary” income. Any balance leftover is automatically forgiven after twenty years worth of qualifying payments. There are two advantages to this over the IBR. One is the IBR caps annual payments at fifteen percent of discretionary income (five percent more) and it only forgives loan balances after twenty five years (five years more).

Other than that, both plans are fairly similar. For both, the borrower must show what is called “partial financial hardship” (essentially proving you need the help). Any unpaid interest that accrues is only owed if the borrower no longer has that financial hardship or otherwise decides to leave the plan. Finally, both subsidize accrued interest for the first three years of repayment. Those two similar methods are both things to consider before getting an education loan.

Lastly, there is the Public Service Loan Forgiveness Program. This option only applies to people with William D. Ford Federal Direct Loan Program loans. You also need to make 120 qualifying payments while being employed full-time by specific public service employers before you can be accepted into the program. If selected, however, you gain debt forgiveness on the remaining balance of your loan. If you were already considering an occupation working for the government, this might be an option for you to review.

Getting into your school and then finding the means to pay for it is one thing. However, if you plan to take out a loan from a licensed money lender, then equally important is how you will be paying it back. Don’t make the mistake of assuming your only option is making the necessary payment every single month. While you should certainly be timely on your payments, you have different repayment plans to choose from. This is one of the things to consider before getting an education loan, as it might affect the school, field or major you choose.