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

Senate Democrats propose property tax cut with surge in revenue

The latest revenue forecast predicted $1.3 billion more in the next three years than anticipated.

Water to be shut down for up to 2 days for about 100 homes

The city of Everett plans to disable one of four pipelines next week while crews work on the system.

Northshore School District bond for new elementary now passing

As of Tuesday, the $275 million proposal was comfortably above the 60 percent supermajority.

“Compromised by deterioration,” Everett apartments condemned

The city says the conditions at Broadway Station Apartments were unsafe for tenants.

Clear, cold weather could give way midweek to chance of snow

A chance of lowland snow looms for Snohomish County by… Continue reading

Load up: Cheesecake Factory plans Lynnwood location

The chain restaurant is listed as a tenant in new development at Alderwood mall.

Everett appeals court’s ban on dress code for bikini baristas

The baristas say they seek to protect their civil rights. The case is on hold pending the appeal.

Lake Stevens girl wants to make sure her peers are well fed

Anneliese Ballou, 9, was named the first student ambassador by the Hungry Hearts Foundation.

Front Porch

EVENTS Snow goose festival coming up The Port Susan Snow Goose and… Continue reading

Most Read