Will You Reap Benefits of the "Pay As You Earn" Student Loan Program?
*Updates: The Atlantic explains eligibility here and the Washington Post answers some more questions about the plan here.
Full disclosure here: I don’t know all the details about this new plan yet, I’m still a bit confused about all the eligibility requirements, and if I were you, I’d look to Heather Jarvis for some more guidance on it once more details come out today.
Today, President Obama will expand the Income Based Repayment program for federal student loans with his new plan, Pay as you Earn. This is the administration’s effort to address sky-high college tuition and student loan debt.
From what I understand, this plan was to start in 2014. However, with the Obama Administration’s new “we can’t wait” mantra, it’s being pushed to go into effect next year so that more students can get relief.
Here are the basic details as I’ve understood them:
Benefits:
- Reduce student loan payments to 10% of discretionary income (similar to the current IBR repayment option except that it’s currently capped at 15% of discretionary income)
- Federal loan forgiveness after 20 years worth of the right kind of payments (the current IBR option forgives loan balances after 25 years worth of payments)
- Consolidate loans & reduce interest rates
I’m liking what I’m hearing about the lowered cap for IBR payments, but I still need to learn more about this plan and find out whether graduates like myself, who have already elected the current IBR option, are even eligible.