New options could ease student loan payments

A new version of the income-based federal student loan repayment program that’s more favorable to many borrowers will go into effect starting Dec. 21, according to regulations scheduled for publication today.

The “Pay as You Earn” program will allow eligible student-loan borrowers to cap monthly payments to 10 percent of discretionary income, and have their loans forgiven after 20 years. An earlier version of the program capped payments at 15 percent and offered forgiveness after 25 years. Congress had scheduled the new program to phase in in 2014, but the Obama administration took regulatory measures to make those options available sooner. It’s estimated 1.6 million borrowers could take advantage of the program.

To qualify, borrowers must have started taking out federal loans after October 1, 2007, and received at least one disbursement after October of last year. They also must qualify for partial financial hardship based on the portion of their income standard repayments would cost. The program applies only to certain direct federal loans, and not to private loans from banks and other non-federal lenders.

The program will set maximum monthly payments based on income and family size, which can adjust each year. Typically those monthly payments could be lower, though there are also possible downsides: By choosing a so-called Income-Based Repayment borrowers could end up paying more over the life of a loan, and they will have to submit documentation each year. Some critics have also argued the program could encourage students to borrow more than they should.

But President Barack Obama has touted the program as a way to ensure borrowers aren’t crushed by student debt burdens at a time when outstanding student debt has by some estimates surpassed $1 trillion.

Two-thirds of the national college class of 2011 finished school with loan debt, and those who borrowed walked off the graduation stage owing on average $26,600 — up about 5 percent from the class before, according to recent figures from the Project on Student Debt.

The Pay as You Earn program also offers loan forgiveness after 10 years to those involved in public service who have made all their payments on time.

The department has also developed a tool allowing borrowers to have their tax data transmitted directly from the Internal Revenue Serivce into their Income-Based Repayment application.

More in Local News

Woman badly burned in north Everett house fire

Two men escaped unharmed from the burning home on Lombard Avenue.

House passes ban on bump-fire stocks

If the Senate approves, Gov. Jay Inslee is expected to sign it into law.

Man charged with rape, manslaughter of teen dying from overdose

Brian Roberto Varela’s arraignment is scheduled for Monday.

Unitarian Universalist Congregation puts faith to work

Its “religiously liberal” members are open to differing creeds and doctrines.

Aid crews get a dose of digital medicine

iPad app does the math for them so aid crews are free to treat children

Boy, 15, pleads guilty to kicking death of teen in Marysville

Prosecutors are seeking 30 days behind bars, which is the higher end of what’s allowed for minors.

Spikes put end to ride from Seattle to Everett in stolen car

Two men were taken into custody at the bottom of Marine View Drive off I-5.

2 arrested after Marysville shooting leaves man brain dead

The victim had shown 1 suspect — a friend — a stack of money he won at the casino, police said.

Election results are finalized for school tax measures

More than 135,000 ballots were cast, a turnout of about 31 percent.

Most Read