The ins and outs of repaying federal student loans - KAUZ-TV: Newschannel 6 Now | Wichita Falls, TX

By Andrew Housser

This year, President Barack Obama signed legislation that prevents interest rates on some federal student loans -- specifically, federally backed, subsidized Stafford loans originated for the 2012-2013 school years -- from doubling. This is welcome news for some students. In addition, the Obama administration also is looking into revising other rules on federally guaranteed student loans. Here are six things you need to know about recent changes.

1. The grace period on Stafford loans has changed.

If you take out a Stafford loan for undergraduate work in 2012-2013, you won't have to make payments until six months after graduating. This has always been the policy. The difference is that in the past, this six-month grace period was interest-free. Starting July 1, 2014, interest will accrue during that grace period.

2. How much you make matters.

The government's Income-Based Repayment (IBR) program allows you to pay back federal loans on a sliding scale based on your income and family size. Anyone who owes more in federal student loans than they earn is eligible to choose IBR. For most borrowers, payments are less than 10 percent of income. The lower your salary, the lower your payment. (Prior to July 2012, the IBR rate was 15 percent.) If you still owe on your loan after 20 years, and consistently have made on-time payments, your remaining balance may be canceled (the previous requirement was 25 years). To switch to an IBR payment plan, contact your loan company. You also can learn more at Federal Student Aid or call 1-800-4FEDAID (1-800-433-3243).

3. Public service workers get a break.

With the Public Service Loan Forgiveness program, people who meet certain criteria do not need to pay their loan. There are several qualifications. First, you need to be employed full-time in an eligible public service field for 10 years. You also need to have made 120 loan payments on or after Oct. 1, 2007 (payments made prior to that do not count). Eligible public service jobs include emergency management, government, military service, law enforcement, public health (including nurses and nurse practitioners), social work, public education, librarians and employees who work for tax-exempt nonprofit organizations. Learn more at MyFedLoan.org.

4. Consider consolidation.

If you have government and/or private direct loans or federal family education loans (FFEL), you may be able to consolidate them. The new consolidated loan could have a lower interest rate than your current blended rate. Learn more at Federal Student Aid or call 1-800-4FEDAID (1-800-433-3243).

5. Ask for assistance.

Graduates with educational debt who take low-paying jobs in certain fields may be eligible for Loan Repayment Assistance Programs (LRAP). LRAPs are most common in the fields of education, medicine (for work in certain high-need communities) and law (for work as public defenders or in public interest organizations). The best way to find out whether your employer offers an LRAP is to ask. 

6. Private loans are the exception.

Unfortunately, you won't get much of a break if you financed your education entirely through a commercial private lender such as a bank or credit union. Most private loan companies charge variable interest rates, which can cause monthly payments to skyrocket unexpectedly. If you find yourself unable to make the minimum payments, contact your lender to discuss your options.   

Thousands of college grads are entering a tight job market burdened with debt. If possible, talk to your school's financial aid officer about your repayment options before you don that cap and gown. Once you get into the right plan, you can focus on landing a good job and building your career.

Andrew Housser is a co-founder and CEO of Bills.com, a free one-stop online portal where consumers can educate themselves about personal finance issues and compare financial products and services. He also is co-CEO of Freedom Financial Network, LLC providing comprehensive consumer credit advocacy and debt relief services. Housser holds a Master of Business Administration degree from Stanford University and Bachelor of Arts degree from Dartmouth College.