College students who are relying on loans to pay for their education finally have some good news coming their way!

The federal Education Department will soon be offering a repayment plan that allows recent graduates to reduce their loan payments based on income. This new program is scheduled to begin Wednesday, July 8.

Today’s borrowers are very concerned about their ability to pay back loans due to the current financial environment. This new repayment program will help ease the concerns and worries of today’s students. These benefits are kicking in at exactly the right time for many college graduates across the United States. It will be very helpful for borrowers to know that there is some flexibility depending on individual circumstances regarding income.

A recent New York Times article noted that also on “Wednesday, the interest rate on new federal Stafford loans, the most widely used federally guaranteed student loan, will drop to 5.6 percent, from 6 percent. By 2012, the rate will fall to 3.4 percent, under a schedule mandated by Congress.”

The changes have been enacted due to the difficulty student borrowers will face finding a job in the current environment. Families have found it much harder, or at times impossible, to use home equity loans to pay for college. Ever since the credit crisis, it has become increasingly difficult and costly to obtain private student loans, which are not guaranteed by the government. These also “typically carry variable interest rates determined by borrowers’ credit histories.”

The interest rate cut applies to new loans, but the “new repayment option is available to borrowers who took out federal loans or who used a federal consolidation loan to combine their higher-education debts.”

The income based repayment program limits what borrowers have to pay. To assess the value owed by the graduates, a simple calculation will be administered. The value to be paid is “15% of the difference between their gross income and 150% of federal poverty guidelines.” After borrowers make payments on loans for 25 years, the balance is forgiven. The federal Education Department does already supply a repayment program, but it is much less generous.

You might be saying to yourself that this sounds too good to be true, but there is just one small catch. “To participate in the program, borrowers must shift their loans into the federal Direct Loan program, in which the government extends credit directly. The forgiveness is not available for loans made by banks or other loan companies, like Citigroup or Sallie Mae.”

The Education Department has set up a Web site with a calculator to determine monthly payments based on income and family size. You can find it here.

It is clear that the time for education is NOW! Check out all of the career options available on Top Colleges and start learning today.