One of the things that the Obama administration has done to lower student loan debt is to create the popular Pay As You Earn (PAYE) repayment program. This program allows people with government student loans to cap payments at 10% of their income in addition to forgiving the remaining debt completely after 20 years.
While this program has been extremely popular with low-income borrowers, it has done nothing for those with hefty student loans that earn a larger income - this may all change very soon. Now the Obama administration is proposing that the same income repayment plan extends to the six million other Americans that have large government student loans but earn a higher wage.
The Proposed Plan
The new PAYE plan would extend to anyone with a government student loan regardless of income. New loan repayment calculations would be based on the amount of money that a person makes, and this would lower monthly debt repayment amounts drastically. On the flip side, the new plan would cost the government $15.3 billion adding to a program that is already very expensive.
In defense of the extended program, the Obama administration has pointed out that the current student loan debt in the US has surpassed $1.3 trillion. Even though extending the program will cost the government more money, this pales in comparison to the billions of Americans that cannot get jobs that pay enough to cover monthly student loan payments. Additionally, many Americans are putting off buying a home or having a family due to massive student loan debts.
Applying for PAYE
The Department of Education is expected to make the new proposal a rule in late October of this year. Until that point, you can still apply for the PAYE program if you make an income that is low in comparison to your debt, and you took out your government loans prior to the year 2007. If this sounds like you, it is possible to sign up for the PAYE program through the government student loan portal. You will have to provide proof of your income in order to do so.
While many Americans have already taken advantage of the PAYE program, many have not. One of the reasons for this is that some Americans with government student loans reside outside of the United States, and proving income tends to be difficult when financial statements do not come from the IRS.
If you do have government student loans from the US, but you live in another country, you can still sign up for the PAYE program. This is somewhat tricky, though, so it’s best to hire a lawyer that can help you file the right paperwork.
There are currently five different types of repayment plans available to US borrowers. Some of those plans are confusing, so it will pay to do your research prior to applying for any one plan. One way to determine which repayment plan will work best for you is to visit studentloans.gov.
The idea behind offering various repayment options is to prevent students from defaulting on government loans (nearly 20% of students do). Defaulting can mean a bad credit rating that will stay on your record for a very long time, and this, in turn, can prevent obtaining a loan for a car or home or anything else.
If you have defaulted on your student loan, you can still get help. We work with borrowers every day to find a solution to student loan debt. If you’re feeling stuck and can’t figure out a way to pay your student loan, call us for your FREE Case Evaluation today at (800) 391-4337.