New student loan changes spell relief for many

Starting today, your monthly federal student loan payments can be linked to how much you can afford based on your salary and family size.

The major downside of this of course is that you're pushing your payments further into the future, so you will ultimately pay more in interest over the long run. But for people facing an immediate financial hardship, it can be a real help. You can use this calculator to see how much your monthly payments might be lowered under the income-based repayment plan. The plan is most advantageous for people with high levels of student debt. If you have lower student debt, you may want to take a look at an extended repayment plan. 

Another feature of the plan is that after 25 years, whatever part of the loan that is unpaid is forgiven. Public servants can have their loans forgiven after 10 years of work in the field. Public service - as the U.S. Department of Education defines it - includes work in schools, government and many nonprofits. Mark Kantrowitz, publisher of FinAid.org, says that if you don't plan on spending the full 10 years in public service required for loan forgiveness, you may want to look at some of the upfront loan forgiveness programs that are offered for civil servants.

Additionally, the interest rate on new undergrad subsidized Stafford student loans dropped today to 5.6 percent from 6 percent. It will continue to decline annually, reaching 3.4 percent by 2012–which may seem a little unfair to students taking out loans today.

With interest rates at rock bottom, now is also a great time to refinance existing Federal student loans if you have variable-rate loans originated before July 1, 2006 (student loans since have been fixed-rate loans). Former students in the 6-month grace period following graduation can now refinance to 2 percent, graduates already repaying loans can consolidate to 2.5 percent, and PLUS loans can be consolidated at 3.38 percent.–Chris Fichera