USA: US Gov’t Debuts ‘Pay As You Earn’ Student Loan Repayment

As an increasing number of people in the United States struggle with managing student loan repayment, the US Department of Education has announced a plan to make payments more affordable. The ‘Pay As You Earn’ repayment plan will allow those under the weight of student loans to repay at a rate that is capped based

As an increasing number of people in the United States struggle with managing student loan repayment, the US Department of Education has announced a plan to make payments more affordable. The ‘Pay As You Earn’ repayment plan will allow those under the weight of student loans to repay at a rate that is capped based on their income.


Borrowers who qualify will have their payments capped at 10% of their discretionary income, with the Department estimating that 1.6 million borrowers could reduce their payments if they qualify.

Income-based repayment, which allows borrowers to pay 15% of their discretionary income, is already used by ~1.3 million. Those who do not qualify for ‘Pay As You Earn’ still may qualify for income-based repayment.

According to the Department, the move will especially help those in public sector employment.

The Department admits that these repayment plans will result in borrowers paying more interest, but reducing the burden of repayment, especially in the first years after college, will provide an overall benefit and safeguard against defaults.

With a growing number of options for repayment, the Department of Education has created a suite of tools to help compare repayment options and select the one that best fits an individual’s circumstances. The tools are available at StudentLoans.gov.

More general information on the responsibilities that come with government student loans and information on managing finances is available at StudentAid.gov.

Easing the burden on student borrowers was a pledge made by President Barack Obama and Secretary of Education Arne Duncan throughout Obama’s first term. With questions over student loan interest rates, grants, and the overall future of federal financial aid for higher education, policies governing student loans developed slowly. Income-based repayment and ‘Pay As You Earn’ are small steps toward the President’s stated commitment of making higher education more affordable.