Sallie Mae Makes It Easier To Lower Federal Student Loan Payments

Repaying federal student loans will get easier for some customers seeking to link their monthly payments to their income, thanks to new rules starting July 1. Sallie Mae, the nation’s leading saving, planning and paying for college company, advises customers with older federal student loans and some married couples who had previously not qualified that they may now be eligible for what’s known as “ income-based repayment,” or IBR. This plan caps the monthly bill at 15 percent of discretionary income.

When IBR was first introduced in 2009, federal rules specified that student loan customers could be eligible if the amount they owed each month when they first entered repayment exceeded 15 percent of monthly income above a basic budget for living expenses. Starting July 1, new rules let customers calculate eligibility using either their current monthly payment or their original monthly payment, whichever is larger. That means customers who have not made payments because their loans were in deferment or forbearance and have seen their balance grow could be eligible to pay a lower amount.

In addition, the new federal rules will eliminate a “marriage penalty” some had encountered when applying for IBR. Now, spouses who both have qualifying federal student loans and file their taxes jointly may use their combined payment amounts for the eligibility formula. In the past, an individual’s loan balance was measured against total discretionary household income without taking into account the spouse’s federal loan payments.

“These new rules are good news for our customers who are working to successfully manage their loans during this uncertain economy and haven’t been able to benefit from IBR in the past,” said Jeanine Pysniak, a customer advocate for Sallie Mae.

Since IBR was introduced last July, approximately 23,000 Sallie Mae customers have enrolled in the plan. Under IBR, in addition to paying a lower amount each month, eligible customers can extend their payment term from the standard 10-year term up to 25 years. After 25 years of qualifying payments, any remaining balance may be forgiven. Federal loans that could be eligible for the plan include Stafford loans, PLUS loans for graduate students, and certain consolidation loans.