U.S. News & World Report has up a helpful interview with Sandy Baum, a professor of economics at Skidmore College and special consultant to the College Board, who runs down the six most important recent developments in college financial aid.
The second one is pretty big:
Income-based repayment for federal student loans. As of July 1, the federal government has a new system that will limit monthly payments on federal student loans to a reasonable percentage of the borrower’s income. Those whose incomes are below 150 percent of the poverty line for their family size will not have any payments due; others will owe no more than 15 percent of the amount by which their incomes exceed this level.
This system is not perfect. The government will pay the interest for some borrowers whose payments don’t cover it, but others will see their debts grow as interest accrues. After 25 years, remaining debt will be forgiven, but unless Congress makes a change, this will be a taxable event. And it’s important to remember that only federal loans—not loans from private lenders that don’t come with a federal guarantee—are covered by this important new program.
Obviously a step in the right direction, but it goes without saying that we have a long way to go.
