Student Loans: news for 2010
Student loans are used to pay for college tuition and books. Sometimes they will cover all or a portion of living expenses while you attend college or university. These loans have substantially lower interest rates and the payments can be deferred while you are in school. The loan can be paid back over a longer period of time, and even thought the interest accrues when you are in school, you don’t have payments until six to twelve months after you’ve left school.
The federal government has a student loan program, and there are private student loan programs available. The latest news on student loan programs focuses around some new tax changes, the federal program for limiting student loan payments on federal student loans, and the private student loan sectors downturn.
Private Student Loan News
Private student loans have been affected by the downturn in the economy and problems with loan practices. Because of these problems Student Lender Analytics or SLA forecasts a decline in private student loans of 24% in the 2009 – 2010 year. SLA is, “an independent research and advisory firm focused on finding the best lenders for students.” The information on the decline in loan origination is targeted toward the major national and regional lenders.
This 24% reduction for the coming year is on top of last year’s drop of 50% in private student loan origination. Across the board loans are harder to get, that fact alone affects the private student loan sector. The Citibank Student Loan Corporation, one of the largest of the private lenders, reports that they will be noticeably reducing their borrowing limits.
But the news isn’t all bad. Other loan companies are stepping things up or entering the market. Wells Fargo, Chase and some credit unions are planning to grow their number of loan originations in 2009 -2010. One of the new companies in the student lending field is Discover. The SLA has estimated that this year Discover will grow the fastest as far as the amount loaned for private student loans.
Credit Unions that offer student loans often have one of the lowest, private loan interest rates. But many people don’t realize that some credit unions provide this service. But the news is, some do.
Student Loan Federal Tax Credit News – American Opportunity Credit
In 2009 the Stimulus Bill expanded the existing Hope Tax Credit and changed the name to the American Opportunity Credit. The new terms affect the 2009 and 2010 tax years. Instead of getting a tax credit for two years of college tuition as in the Hope program, now the credit has been extended to four years and has expanded income eligibility. There are new guidelines and amounts which are noted below:
- There is a $2,500 maximum annual credit, per qualifying student.
- The credit is only available if the student is enrolled in school at least half-time.
- The student must be enrolled in a program leading to an undergraduate degree, or one that leads to ‘legitimate education credentials.’
- Any and all family members can receive the credit; there is no limit if they meet the other requirements.
- If the credit exceeds a taxpayer’s total tax bill, $1000 of the credit can be refunded to the taxpayer.
- Parents and guardians can claim the credit for a dependant child’s college expenses if they are listed as a dependant on the tax form.
- The credit will phase out, starting at $80,000 – $90,000 adjusted gross income on a single tax return, double that for a joint return.
- There are additional student credits available to students in targeted Midwestern disaster areas.
More information on the American Opportunity Credit can be found in IRS Publication 970. The title of this publication is Tax Benefits For Education.
Federal Student Loan News – Income-Based Repayment (IBR) Program
The government started a new program that took effect on July 1, 2009 that allows those with federal student loans to ask the government to limit the amount they pay in monthly payments to less than 15% of their income. This new program is called the Income-Based Repayment (IBR) program. Many of the people who qualify for this program will pay much less than 15%.
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