Revised Program Will Reduce Student Loan Repayments
More student loan borrowers are expected to gain access this year to a repayment plan that cuts monthly debt payments to a small share of their income.
The plan has been called Repaye, for “revised pay as you earn.” As the name suggests, it is based on the “pay as you earn” repayment program, which became available to some student loan borrowers nearly three years ago.
The new plan grew out of an executive order signed last year by President Obama, who aimed to expand the pool of borrowers helped by the pay-as-you-earn program. Concern has been growing about the economic impact of student debt and mounting loan defaults. In 2013, nearly 70 percent of graduating college seniors had student loans, and their average debt was more than $28,000. The Obama administration has said up to five million more borrowers will become eligible for the expanded program.
The new version of the pay-as-you-earn program will be available to anyone with federal direct loans, regardless of when students receive the loans and what their debt-to-income ratio is. (The original pay-as-you-earn plan is available only to those who borrowed after 2007 and requires borrowers to have high debt relative to their income.)