Major Changes Coming For Pell Grant Repayment

WASHINGTON, D.C. — On Wednesday, a new repayment option changed to make monthly payments more affordable for Americans with heavy federal student loan burdens.

Recent changes to Pell Grant student lending offer changes that can affect future and past students who borrow for college.

A new "income-based repayment plan" protects borrowers by linking payments to income and family size. A related new program offers additional benefits to those working in public service jobs.

"We know many graduates are concerned about their ability to repay student loans in the current economic environment," U.S. Secretary of Education Arne Duncan said in a statement released Tuesday. "This new plan addresses the issue head on by giving them the option of a monthly payment tied to their income."

The new IBR program is available to borrowers repaying new and existing federal student loans (Direct or Federal Family Education Loans). According to information provided by John White of the U.S. Department of Education, those with high student loan debt relative to their income are likely to be eligible for the IBR program, resulting in reduced monthly payments and, in some cases, no monthly payments.

White said under the proposed option, someone with student loan debt of $25,000 at 6.8 percent interest would have a monthly payment of $288 under the standard 10-year repayment plan. If the borrower were single with no dependents and had an adjusted gross income (AGI) of $30,000, the monthly payment would drop to $172 per month, a reduction of $116 per month, or 40 percent under the IBR Program.

Payments are recalculated each year, according to White. The lower payments may result in longer repayment periods and increased interest charges. While individual lenders determine eligibility, borrowers can use a new IBR calculator to estimate monthly payments and eligibility. To apply for IBR, borrowers should contact their lender.

White said borrowers who work in public service may be eligible to receive an additional benefit while using IBR: after 10 years, any remaining loan balance may be canceled. This Public Service Loan Forgiveness Program is available only in the Direct Loan Program to borrowers making payments while working full-time in schools, government or many nonprofit organizations. Borrowers with Federal Family Education Loans can consolidate their loans into the Direct Loan Program in order to tap into this benefit.

Luke Thomas from the Career College Association said Wednesday afternoon, the changes can effect any student. Thomas recommended those planning on attending school again should go to for a "free application for federal student aid" as well as information on the Pell Grant. Students will find out if they are eligible in addition to how and when to apply.

Additional changes that took effect July 1 are:

A $600 per student increase to the maximum Pell Grant for the 2009-10 school year to $5,350.

Federal Pell Grant eligibility for students whose parent or guardian was a member of the Armed Forces and died as a result of performing military service in Iraq or Afghanistan after Sept. 11, 2001.

A decrease in interest rates on subsidized federal student loans for undergraduates from 6 percent to 5.6 percent.

"I encourage folks who have any questions to ask before completing the application," said Thomas.

Thomas said in addition, the FAFSA form is "easier to use".

"Don’t let what you perceive as bureaucracy get in your way.The government is going out of their way to see that people can access these funds," said Thomas.

More detailed information about IBR and other repayment plans is available from the Department of Education at 1-800-4-FED-AID or Click here for related video clips from Secretary Arne Duncan.

Contact Barbara Goldman at or by calling 606-564-9091, ext. 274. (The Ledger Independent)

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