Published December 2012. Financial aid and student loan rules change often, so some details may be out of date. Ask us about your situation.
On December 21, a wider swath of college graduates officially became eligible for the government's Pay As You Earn program. Under the new legislation, which was spearheaded by President Barack Obama, students can pay back their loans based upon how much money they earn after graduating from college.
The new program streamlines the previous Income Based Repayment plan (IBR) which was developed by the government back in 2009. Under that initiative, monthly payments for college grads were capped at 15 percent of their monthly income with complete loan forgiveness granted after 25 years of steady payments.
This new legislation reduces the monthly cap to 10 percent of a graduate's earnings with debt forgiveness after only 20 years, easing the burden for students struggling to find work after graduation.
After winning reelection back in November, the president and the Department of Education (DOE) took measures to speed up the program's enactment to late December. The Pay As You Earn plan was originally supposed to be fully implemented after the new year.
According to the Institute for College Access and Success, the unemployment rate for college graduates was roughly 8.8 percent in 2011, while the average postgrad had a debt of about $26,000.
The DOE estimates that since 2009, more than 1 million graduates have taken advantage of IBR, though thousands more could potentially qualify who have yet to apply. Even more graduates could potentially qualify for the Pay As You Earn program, as the initiative extends the age bracket of students for whom the IBR is now an option.
College Financing Group has experts available who can help make paying for college more affordable. Thanks to years of experience providing financial aid consulting to college graduates, we can help former students choose the best repayment options for them.