Changes Make Federal Financial Aid, Loan Repayment Easier

Federal changes may make it easier for graduates to pay back their student loans.

Changes to federal financial aid went into effect on July 1 that should make it easier to get aid – and to pay back those loans. MPB’s Cari Gervin has the details.

The changes are part of the reauthorization of the Higher Education Act. The notoriously complex Free Application for Federal Student Aid, or FAFSA, will get a complete overhaul.

Dewey Knight helps run the financial aid office at the University of Mississippi. He says first-generation college students are particularly at a loss when filling out the forms.

“It’s kind of intimating, the FAFSA and all of the application process – it overwhelms some of those applicants, and it almost discourages them from applying.”

In addition to the streamlined FAFSA, the US Department of Education now will allow loans to be paid back based on income. Knight says that for some, the new plan is a blessing.

“It does allow the student some flexibility, especially in tough economic times like we have now, where many of our graduates might have to take positions where they’re really underemployed and therefore their wages and salaries are really not at a level that they would have hoped for.”

The income-based repayment option sets the monthly payment at about 15 percent of one’s discretionary income. Officials say that if you owe as much as you earn, then you probably qualify for the plan.

“I have about $35,000 in student loans, which is about a yearly salary for a teacher with a master’s degree.”

That’s Megan Latimer-Taylor. The 30-year-old teaches kindergarten in Quitman County. She says she’s paying over $300 a month on her loans – a big chunk of her salary. But when asked if she’ll check out the new plan, Latimer-Taylor shakes her head no.

“It just draws it out more, so you’re paying that much more interest. So it’s not that great of a deal.”

But for those who can’t make their payments, it could be a necessity.

However, the income-based repayment option only applies to federal loans. Those with large private loans, like most graduates of medical and law school, will have to wait on more action from Congress to get a break on their payments.

For MPB News, I’m Cari Gervin in Oxford.

For more information on whether your student loans qualify for income-based repayment, contact your lender or visit www.ibrinfo.org.