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The Income-Based Repayment plan, a federal program that became available this summer, offers relief to those with large amounts of student debt. But experts advise students to do the math before applying.
(Jane Park/MNS)
WASHINGTON — Jeana Harbison drives a 1995 Toyota Camry. But upgrading is on hold for now, because the 27-year-old law school graduate owes almost $139,000 in student loans.
“I went and I didn’t really think about the aftermath,” said Harbison, who said going to law school and becoming an attorney was her lifelong dream. “I just knew I had to take this money out to go.”
Today Harbison works as a legal assistant for the federal government. She makes about $70,000 a year. Still, she could not afford her $900 monthly loan payments.
So when she learned about Income-Based Repayment – a federal program that became available July 1 – Harbison considered applying.
Income-Based Repayment (IBR) caps monthly payments to students’ income levels and family size. After 25 years of qualified payments, students are eligible to have any remaining debt forgiven. Federal workers like Harbison can receive loan forgiveness after just 10 years of payments.
“It’s an opportunity for them to have an adjustment made to their monthly payment and allows them to extend it beyond the limit of 10 years,” said Dan Small, executive director of the student financial aid office at George Washington University.
IBR is most beneficial to students with low-paying jobs and high amounts of debt. But because Harbison makes well above the poverty level, she learned that her monthly payments under IBR wouldn’t be reduced very much.
In fact, it would only bring her them down to about $800 – still too expensive for her.
“It’s not helpful or beneficial to me,” Harbison said.
Right now Harbison pays $600 monthly on just the interest on her loans. She knows that she’ll carry the burden of her loans with her for at least the next 30 years.
“I am very scared, very worried because that’s like having a mortgage,” she said. “I mean I basically owe a mortgage to Sallie Mae.”
Harbison, who entered law school with about $20,000 in undergraduate debt, is just one of many struggling to pay back.
In 2008, 67 percent of graduating students at four-year institutions left college with an average debt of $23,200. That’s an increase of 24 percent over 2004, when student debt averaged $18,650.
Pedro de la Torre, advocacy senior associate for Campus Progress, said IBR is one program that can help college become more affordable for these students.
“We think it’s a real help for a lot of folks who have high levels of student debt and especially those who have lower-paying jobs in public service,” he said.
Still, it’s a case-by-case thing, and experts advise students to do their research.
“Just understand that you’re gonna be paying this loan at a much longer period of time and a lot of it will be paying it at more interest rates, so they have to know the math that’s behind it,” said Dan Small.
Harbison said she’s going to keep working on repaying her loans without the help of IBR, and make some life adjustments on the way.
“It makes it harder to think about having children, to think about getting married, because you have to take in considerations. You have to pay this debt.”