The number of borrowers defaulting on federal student loans continues to rise in Maryland and elsewhere. But even during the long and painful economic recovery, many of these defaults likely are unnecessary.

The federal government has long offered leniency for borrowers in financial hardship. But two years ago it added an income-based repayment plan that caps monthly payments based on a borrower's income and family size.

If a borrower earns little or nothing, the monthly payment would be zero.

Yes, zero.

And after 25 years, any remaining balance is forgiven.

It's impossible to find such a generous break from any private lender.

"Given income-based repayment there really is no reason why anybody should default on their loans," says Mark Kantrowitz, publisher of, a website that provides student aid information.

Still, he adds, "a lot of students who could benefit from it, aren't aware of it. They default rather than calling their lender before they default to investigate their options."

Kantrowitz estimates that less than 2 percent of borrowers repaying loans are using the income-based repayment method, although as many as 10 percent would qualify.

Even the Department of Education, which released the latest default rates last week, noted that it plans to increase its outreach to make sure borrowers are aware of this repayment option.

Anything is better than defaulting.

Borrowers are in default on federal loans if they don't make a payment for almost a year. After that, the government has many tools, including garnishing wages and withholding tax refunds, to recoup taxpayers' money. And the government rarely lets up on its pursuit.

The Education Department reported last week that 8.8 percent of student loan borrowers — more than 320,000 — had defaulted within the first two years of repayment for the period ended in fall 2010. That's up from 7 percent for the two-year snapshot that ended in fall 2009.

In Maryland, 6.7 percent of borrowers defaulted in the first two years of repayment ending in 2010, up from 5.8 percent from the previous period.

You generally will qualify for income-based repayments if your debt is high in relation to your income.

Monthly payments won't exceed 15 percent of discretionary income, which is based on a formula tied to the poverty rate. If your income is skimpy enough, you might pay little or nothing.

For example, a Marylander graduating with $25,000 in student loans would pay about $287.70 a month under the standard 10-year repayment plan, according to the Education Department. But under the income-based plan, if that borrower made $20,000 a year, he or she would pay only $45 a month.

Your income will be reviewed annually. If your earnings rise, so will your payments.

Once you make 25 years of payments under the income-based plan, any balance left over is wiped out.