The following are some of your repayment options under the federal loan program:
-- Deferment. Under this option your loan payments can be temporarily suspended for specific situations such as unemployment or economic hardship. If you have a subsidized federal loan you don't have to pay interest while in deferment. However, if you have an unsubsidized loan, interest keeps accruing and is capitalized if you don't pay it.
-- Forbearance. You can reduce or stop making payments for a set period of time. Unlike the deferment option, interest continues to accrue.
-- Graduated repayment. This plan allows low, interest-only payments followed by principal-and-interest payments for the remaining term of your loan.
-- Income contingent repayment. With this option, you can decrease your monthly payment based on your gross income.
-- Extended repayment. Eligible borrowers who owe more than $30,000 may be able to take as long as 25 years to repay their student loans. (You get another five years if you consolidate your loans.)
-- Income-based repayment. This latest repayment option helps keep your loan payments affordable with caps based on your income and family size. There's a sliding scale used to determine how much you can afford to pay. If you earn below 150 percent of the poverty level for your family size, your required loan payment will be zero. The income-based option is available to borrowers with loans obtained through the direct and guaranteed federal loan programs. It covers most types of federal loans made to students. It does not include loans made to parents.
There are a lot of other stipulations about this new repayment option. For more information go to www.ibrinfo.org.
I've met an incredible number of people -- too many -- who really could have paid their student loans under the standard payback period but because they didn't want to live frugally, saw their loan balances jump significantly over the years.
If you truly can't afford to fully pay what you owe, take advantage of the extra breathing room. But remember the more you delay, the more you may pay.