PAYE Expansion Could Help 5 Million Borrowers

June 10, 2014

Carrie Warick, Director of Partnerships and Policy

Washington is abuzz with news about student loans with many proposals to help those who are currently in loan repayment. Yesterday, President Obama directed the Secretaries of Education and Treasury to work to expand the Pay as You Earn (PAYE) income based repayment plan, increase awareness of borrowers of the various types of income based repayment options, and to evaluate student loan counseling resources. 

The PAYE plan currently allows borrowers who took out their first loan in 2007 or later and were still borrowing in 2011 to have their loan repayments capped at 10% of their income and their outstanding debt forgiven after 20 years. The President has asked the Department of Education to determine new regulations by Dec. 31, 2015, to expand PAYE for those borrowers most in need of repayment help but whose current borrowing time frame does not make them eligible. The Administration estimates that by expanding the time frame to include direct student loan borrowers who took out loans prior to 2007 or not after 2011 could expand the benefit to 5 million more students.

The President additionally instructed the Secretary of Education to improve communication strategies with borrowers about the several different types of loan repayment options. Private partners such as H&R Block and Intuit as well as several professional groups including the National Association of Student Financial Aid Administrators (NASFAA), the National Education Association (NEA), and American Federation of Teachers (AFT), will also join the efforts to spread the word about income based student loan repayment options. Finally, the Secretaries of Education and Treasury will run a pilot program this fall that will test the effectiveness of student loan counseling, including the Department of Education’s Financial Awareness Counseling Tool.

During his remarks, the President also offered support to Senator Elizabeth Warren’s bill to for borrowers to be able to refinance their student loans to a lower interest rate. [Update 6.12.14 - The bill failed on the Senate floor, but Senate Democrats vowed to reintroduce it in the fall. Senate Republicans accused the Dems of using students as political pawns.]

Republican education leaders, including Senator Lamar Alexander, Ranking Member of the Senate Health, Education, Labor, and Pensions committee said the President’s announcement was “clearly a partisan political stunt.” Representative Kline who is chair of the House Education and Workforce Committee said that the plan would not “make the cost of higher education more affordable.” He continued by saying that, “Washington Democrats should stop treating students and families as political pawns and start working with Republicans on real solutions that will move the country forward.”





Back to Blog

Leave a Reply:
Login
 
 
 

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License