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Lowest Student Loan Payments Available for the New Pay As You Earn Plan

Below is information regarding the new Pay as You Earn Repayment Plan. This plan can help student borrowers keep their payments at an affordable level, as their income gradually increases and ultimately can result in the forgiveness of debt after 20 years.  Today we focus on the qualifications for the plan and tomorrow we will tackle the pros and the cons of for borrowers.

The Pay As You Earn plan will be available to borrowers by the end of 2012.

Monthly Payments

Under this plan, your monthly payments are

·        Based on your income and family size;

·        Adjusted each year, based on changes to your annual income and family size;

·        Usually lower than they are under other plans;

·        Never more than the 10-year standard repayment amount; and

·        Made over a period of 20 years

Qualifications:

1.      To qualify for Pay As You Earn, you must have a partial financial hardship. You have a partial financial hardship if the monthly amount you would be required to pay on your eligible federal student loans under a 10-year Standard Repayment Plan is higher than the monthly amount you would be required to repay under Pay As You Earn. For this purpose, your eligible student loans include all of your William D. Ford Federal Direct Loan (Direct Loan) Program loans that are eligible for Pay As You Earn, as well as certain types of Federal Family Education Loan (FFEL) Program loans. Although your FFEL Program loans cannot be repaid under Pay As You Earn, the following types of FFEL Program loans are counted in determining whether you have a partial financial hardship:

·     Subsidized and Unsubsidized Federal Stafford Loans

·     Federal PLUS Loans made to graduate or professional students

·     Federal Consolidation Loans that did not repay any PLUS loans for parents 

2.      You also must be a new borrower as of Oct. 1, 2007, and must have received a disbursement of a Direct Loan on or after Oct. 1, 2011. You are a new borrower if you had no outstanding balance on a Direct Loan or FFEL Program loan as of Oct. 1, 2007, or had no outstanding balance on a Direct Loan or FFEL Program loan when you received a new loan on or after Oct. 1, 2007.   

Your payment amount may increase or decrease each year based on your income and family size. Once you’ve initially qualified for Pay As You Earn, you may continue to make payments under the plan even if you no longer have a partial financial hardship. Find out whether you’re eligible for Pay As You Earn by visiting the U.S. Department of Education’s Federal Student Aid website.

Eligible Direct Loans

The following Direct Loans are eligible for Pay As You Earn:

·        Direct Subsidized Loans

·        Direct Unsubsidized Loans

·        Direct PLUS Loans made to graduate or professional students

·        Direct Consolidation Loans without underlying PLUS loans made to parents

 Loans That Are Not Eligible

The following loans are not eligible for repayment under Pay As You Earn:

·        Direct PLUS Loans made to parents

·        Direct Consolidation Loans that repaid PLUS loans (Direct or FFEL) made to parents

·        FFEL Program loans

·        Private education loans


Published Dec 6, 2012.