Fed programs could help you save on student loan repayments

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If your monthly bills include student loans, or you're thinking about whether and how much to borrow for college, you're not alone.

At private colleges, tuition and room and board totals more than $38,000 this year. State universities and community colleges are cheaper, but even so, only about a third of full-time students pay full freight for their educations -- and student loans are a big part of how they make up the difference.

The federal government is moving to make repaying those loans easier.

This fall, President Obama announced two new student loan programs.

The first lowers monthly student loan payments for eligible borrowers; the other lets borrowers with a mix of direct federal loans and loans under the old Federal Family Education Loan Program to consolidate them, paying one monthly bill and a slightly lower interest rate.

The president is using his executive authority to expand the existing income-based repayment program with a "pay as you earn" option that caps monthly payments at 10% of discretionary income -- the part left over after paying for necessities -- toward student loan balances.

After 20 years of such payments, any remaining loan balance would be forgiven.

This improved program was already scheduled to begin in 2014; now it will begin in 2012.

The current program has similar terms but asks borrowers to pay 15% of their discretionary income every month and have any loan balance forgiven after 25 years. (Loan terms are better for those who pursue public service careers after graduation.)

The White House says this reduced cap could benefit 1.6 million borrowers.

Here's an example of how much you could save:

Under the current program, if you earn $40,000 a year, you'll pay $296 a month based on the 15% cap. That payment could be reduced by about $100 a month with a 10% cap.

To figure your payment, find 10% (or currently 15%) of the difference between your adjusted gross income and 150% of the U.S. Department of Health and Human Service's poverty guideline based on family size and state.

In 2011, that guideline is $10,890 for a single person living in the 48 contiguous states, $14,710 for a family of two and $22,350 for a family of four.

To qualify for this program, your federal student loan debt must be high relative to your income and family size. The U.S. Department of Education's student aid website includes a calculator that can help determine if you're eligible.

Meanwhile, the debt consolidation program helps what Secretary of Education Arne Duncan estimates are 6 million borrowers who have both direct federal loans and loans under the Federal Family Education Loan Program, which ended in 2010.

Pull debts into a single pile, and you get an interest rate that's approximately a half percent lower, as well as the convenience of paying one monthly bill.

PLUS loans are eligible, but Perkins loans, private student loans and older student loans are not. Nor are any loans that are in default.

You'll need a mix of direct and bank-issued federal loans to use the new program. If you've just got one or the other, or if your loans are not very recent, you may be able to consolidate under an older, less advantageous government program.

The Department of Education will begin reaching out to qualified borrowers in early 2012.

You can get more information on the new measures by calling 1-800-4fedaid or by going to studentaid.ed.gov.

They'll even tell you what kind of loans you have.

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