US Gov’t Debuts ‘Pay As You Earn’ Student Loan Repayment

As an increasing number of people in the United States struggle with managing student loan repayment, the US Department of Education has announced a plan to make payments more affordable. The ‘Pay As You Earn' repayment plan will allow those under the weight of student loans to repay at a rate that is capped based on their income.

Borrowers who qualify will have their payments capped at 10% of their discretionary income, with the Department estimating that 1.6 million borrowers could reduce their payments if they qualify.

Income-based repayment, which allows borrowers to pay 15% of their discretionary income, is already used by ~1.3 million. Those who do not qualify for ‘Pay As You Earn' still may qualify for income-based repayment.

According to the Department, the move will especially help those in public sector employment.

Most borrowers are able to repay their student loans, but for many who are struggling – including teachers, nurses, first-responders and others in lower-paying public service careers – these income-driven plans could reduce monthly payments to help ensure that borrowers are able to manage their debt and avoid the negative consequences of defaulting on their student loans.

The Department admits that these repayment plans will result in borrowers paying more interest, but reducing the burden of repayment, especially in the first years after college, will provide an overall benefit and safeguard against defaults.

With a growing number of options for repayment, the Department of Education has created a suite of tools to help compare repayment options and select the one that best fits an individual's circumstances. The tools are available at

More general information on the responsibilities that come with government student loans and information on managing finances is available at

Easing the burden on student borrowers was a pledge made by President Barack Obama and Secretary of Education Arne Duncan throughout Obama's first term. With questions over student loan interest rates, grants, and the overall future of federal financial aid for higher education, policies governing student loans developed slowly. Income-based repayment and ‘Pay As You Earn' are small steps toward the President's stated commitment of making higher education more affordable.

"We know many recent graduates are worried about repaying their student loans as our economy continues to recover, and now it's easier than ever for student borrowers to lower monthly payments and stay on track," said U.S. Secretary of Education Arne Duncan.

In the last year, student loan debt in the United States has eclipsed the $1 trillion mark, as well as overtaking credit card debt. The average debt burden carried by a graduate of a 4-year school is ~$26,000.

Matthew Tabor

Matthew Tabor

Matthew is a prolific, independent voice in the national education debate. He is a tireless advocate for high academic standards from pre-K through graduate school, fiscal sense and personal responsibility. He values parents’ and families’ rights and believes in accountability for teachers, administrators, politicians and all taxpayer-funded education entities. With a unique background that includes work in higher education, executive recruiting, professional sport and government, Matthew has consulted on new media and communication strategies for a broad range of clients. He writes the blog “Education for the Aughts” at , has contributed to National Journal’s ‘Expert’ blog for Education , and interacts with the education community on Twitter and Google+.
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