Pay As You Earn Plan Launched
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UPDATED: Nov 5, 2012
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On Nov. 1 the “Pay as You Earn” student debt payment plan was finalized. Under the plan’s features, some college graduates will have the ability to tie their federal college loan payments to 10 percent of their discretionary income. Following a period of steady payments, participants’ debt will be forgiven after 20 years.
“This will give flexibility to graduates who are considering lower-paying jobs with the government, or nonprofits,” said Carly Robinson, a former University of Colorado student government leader, according to the Boulder Daily Camera.
Unfortunately, not everyone is eligible to apply for the new college loan plan. Only borrowers who took out college loans in or after the 2011 fiscal year are eligible. Borrowers who took out a student loan before the 2008 fiscal year are ineligible. Essentially, only recent graduates qualify.
However, ineligible applicants can still take advantage of an older version of the plan, which requires payments of 15 percent of a borrower’s discretionary income. Balances are forgiven after 25 years under this older version.
The new plan has taken a strong role in the current Presidential election. President Obama’s supporters believe that the plan offers crucial relief at a time of escalating college loan debt. Former President Bill Clinton, a supporter of President Obama, applauded the new program’s creation and features.
“You need to tell every voter where you live about this,” he said at the Democratic National Convention, according to the Wall Street Journal.
Pauline Abernathy, vice president of the Institute for College Access and Success, feels that word of the program hasn’t spread and many borrowers remain unaware of the new option.
The “Pay As You Go” Plan is expected to cost the federal government $2.1 billion over the next 10 years. In response to this the Department of Education intends to increase revenue through changes like loan consolidation.
Borrowers can apply online at the Federal Student Aid website when the plan goes live by the end of the year.