Monday, June 16, 2014

New Repayment Caps On Student Loans

The ABA Journal recently reported that "President Barack Obama has signed an executive order expanding a 2010 law that capped student-loan repayments for newer government-backed loans at 10 percent of the borrower’s monthly income."

Obama cited "his own experience with law school loans paid off just 10 years ago. The goal is to implement the expansion in December 2015, after new rules are drafted."

Under the current rule "the 10 percent cap, part of the Pay as You Earn program, is not available to those with older loans. Monthly payments are based on a sliding scale, and any remaining balance is forgiven after 20 years of payments, or 10 years for those in public service jobs. Pay as You Earn is more generous in its loan caps than a different Income Based Repayment program that currently applies to all borrowers with federal student loans. IBR caps payments at 15 percent of discretionary income."

As Obama said, the problem is that "higher education has never been more important, it’s also never been more expensive. Over the last three decades, the average tuition at a public university has more than tripled. At the same time, the typical family’s income has gone up just 16 percent."

"The expansion of Pay as You Earn is good news for law students and grad students who take on the most debt."

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