Student Loan Borrowers Can Now Apply for Pay As You Earn

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The Student Loan Alliance Encourages Borrowers to Check Their Eligibility for New Program

Student Loan Alliance

Student Loan Alliance

For Pay As You Earn to be successful in alleviating some of the financial stress on families with student loans, increased awareness about the program is essential.

As of Friday, December 21, eligible student loan borrowers can now apply for the new "Pay As You Earn" repayment plan. Pay As You Earn provides borrowers struggling in the midst of the growing student loan crisis with an affordable repayment option.

With student loan debt increasing at an alarming rate - the average debt for a student loan borrower in the U.S is nearly $27,000 - many are in need of immediate assistance. Repayment under Pay As You Earn is based on income and family size, with monthly payments capped at 10% of a borrower’s discretionary income. Also, if there is a remaining balance after 20 years of qualifying payments, that balance will be forgiven.

Pay As You Earn is similar to another federal program - Income Based Repayment (IBR) - but the new program could potentially offer borrowers impacted by the student loan crisis even greater relief. Introduced in 2009, IBR caps student loan payments at 15% of a borrower’s discretionary income and allows for forgiveness after 25 years.

While this new program has great potential for helping those struggling with student loan debt, borrowers must take the initiative to apply for the program. History has shown that while many borrowers may qualify for lower payments, not all eligible borrowers will enroll in alternative repayment plans. Whatever the reason - whether borrowers are unaware of their options, or confused by the application process - not all eligible borrowers are getting the help they need.

"Enrollment numbers for IBR are low, despite the growing number of student loan delinquencies," said Larry Gilmore, President of the Student Loan Alliance, a non-profit organization focused on developing solutions to mitigate the student loan crisis. According to the Federal Reserve Bank of New York, 11% of student loan balances are at least 90 days delinquent. It’s possible that some of those loans could have avoided delinquency if enrolled on a repayment plan that calculates payments based on income. "For Pay As You Earn to be successful in alleviating some of the financial stress on families with student loans, increased awareness about the program is essential," said Gilmore.

Borrowers who are experiencing financial hardship and believe they may qualify for Pay As You Earn can either apply online at or contact their loan servicer to complete a paper application. Here are the basic eligibility requirements:

> Must be a new student loan borrower. To qualify, a borrower must have started taking out federal student loans after Oct 1, 2007, and must have received a new Federal Direct Loan after Oct. 1, 2011.
> Only Federal Direct Loans are eligible. Other federal loans, such as Federal Family Education Loans (FFEL), do not qualify for Pay As You Earn. Parent PLUS loans and consolidation loans that include Parent PLUS loans also do not qualify, and neither do private loans.
> The loan cannot be in default. If a borrower’s student loan is in default - 270 days without payment - it will not be eligible for Pay As You Earn.

Since loans in default do not qualify for the program, borrowers should contact their servicer at the first sign of trouble. If a borrower is not eligible for Pay As You Earn, they can look into Income Based Repayment, or a number of other federal programs for which they may qualify.

About the Student Loan Alliance
The Student Loan Alliance (SLA) is a nonprofit organization focused on developing long-term solutions to address the student loan crisis with a key focus on leveraging independent nonprofit counselors as "trusted advisors." Alliance members deliver efficient counseling and timely assistance by implementing best in class systems and processes. The student loan crisis affects many households across the country and SLA is committed to addressing the crisis by promoting partnership, developing effective outreach and awareness campaigns, and providing streamlined education and counseling.

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Larry Gilmore
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