The U.S. Department of Education is hoping to eradicate some of the misunderstanding around ways to pay back student loan debt with a new outreach program designed to teach graduates about more affordable options when paying back their loans.
In a statement released this week, the department said it will be ?sending emails about loan payment options to about 3.5 million recent graduates.
The department also will be sending a “financial aid toolkit” to guidance counselors across the country aimed to give them resources and ways to help their ?students repay their loans.
The department will be notifying students via email about an option that has been available since 2009.
The system, called Income-Based Repayment, determines someone’s monthly loan payment based on their income instead of the amount of money borrowed.
The other option is a system called the standard loan.
This system gives the borrower 10 years to pay the money back, and the monthly payments are based off the total amount owed.
Which system is right for which borrower depends on the financial situation of the student, said Val Meyers, the associate director of the MSU Office of Financial Aid.
“For a standard loan, if you haven’t borrowed that much, paying it off in 10 years is doable,” she said. “But if you don’t have a job or borrowed a lot is is harder.”
Meyers said the income-based repayment system is better for students who have a low income. If their incomes go up, however, she said problems could arise, because the payments go up as well.
The goal of the system is to educate borrowers about options that are available, she said.
“The biggest goal is not to have people do this, but just to make sure people know it’s there,” she said. “A lot of ?borrowers just don’t know, so they might give up and default when they really don’t have to.”
The outreach program is part of a national plan championed by President Barack Obama’s administration to make college more affordable throughout the country.
During a telephone press conference held last month, Duncan said attending college “has never been more expensive.”
In a recent statement, Duncan said making information more available could save student borrowers from stress in the short term.
“Reaching out to borrowers to ensure that they have the information they need to manage their student loan debt is an important part of the administration’s proposals to improve college value and affordability,” U.S. Secretary of Education Arne Duncan said in the statement.
Obama’s long-term goal is to develop a new college ?rating system by 2015, which lawmakers could use to offer more funding or scholarships to schools with the best value and return on student investment.
Staff writer Michael Gerstein contributed to this report.
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