IBR plan makes college more affordable with capped payments

U.S. Secretary of Education Arne Duncan said Thursday that making it easier for college graduates to pay back federal loans will help improve the national college completion rate and possibly attract more interest toward careers in public service.

According to the U.S. Department of Education, the Income-Based Repayment plan would apply to the major types of federal loans made to students. Under the IBR plan, which became available in July, the required monthly payment would be capped at an amount that would be affordable based on the graduate’s income level and family size, according to the Federal Student Aid office.

In a telephone media conference with college students, Duncan said the IBR plan would allow graduates entering into a career service field, like teachers and police officers, to be able to forgive remaining debt after 10 years of payments based on income level and family size.

“We are particularly focused on bringing in the next generation of great teachers into our country’s classrooms,” Duncan said.

Lenders perform calculations based on the person’s income, family size and state of residence to calculate the IBR monthly payment amount, according to the Federal Student Aid office Web site. If that amount is lower than the monthly payment under a 10-year standard repayment plan, then the person is eligible to repay his or her loans under IBR. However, lower payments may result in a longer repayment period and additional interest, according to the office.

Duncan also discussed President Barack Obama’s plan to make student loans and college more affordable, noting that by increasing Federal Pell Grants, which provide need-based grants to low-income undergraduates, more students would have the opportunity to attend colleges and universities who may not have had the opportunity to do so in previous years.

The U.S. House of Representatives in July passed the Student Aid and Fiscal Responsibility Act, which would increase funding for Federal Pell Grants and Federal Perkins Loan program by cutting the subsidy money currently paid to private lenders for their federally backed loans. The legislation is pending Senate vote.

The legislation would implement Obama’s budget proposals for student financial aid, including a switch to 100 percent direct lending, according to FinAid, a student financial aid Web site.

The increase in funding for the Federal Pell Grants would not raise taxes or contribute to the national debt, Duncan said. Instead, it would come from stopping bank subsidies, he said.

“All of the funding for this would come from the fact that we would simply stop subsidizing banks who are currently making loans, remove those subsidies from banks, and simply invest the savings,” Duncan said.

About $87 billion could be acquired for student loans from stopping the bank subsidies on loans, Duncan said.

Along with the increase in federal financial aid programs, decreasing the cost of textbooks for students was also a part of the president’s plan, said Robert Shireman, deputy under secretary of education.

Making professors aware of the cost of student textbooks before they assign them would be one way to lower the cost of educational expenses, Shireman said. Many faculty members say they wouldn’t have assigned certain textbooks to their students if they had known before that they were so expensive, he said.