New Changes to Income Based Repayment – Pay as You Earn | 12.18.12

Posted in Financial Aid, financial aid tips, News, Repayment By Student Loan Network Staff

Great news for student loan debt holders who are struggling to pay those loans every month. Have you heard of the Income Based Repayment (IBR) program, or the “Pay as You Earn” plan? Well if you haven’t, you might want to listen up.

To give you a little history- the US Department of Education implemented an Income Based Repayment (IBR) program in 2007, which aimed to help borrowers pay off their student loan debt, relative to their earnings. However, the program wasn’t cutting it as the student debt number continued to rise to $864 billion in federal loans and most students out of college were landing low paying jobs.

The improved version of this program, also referred to as the “Pay as You Earn” plan, is designed to address this issue and will launch on December 21st, 2012.

This plan is designed to do two things:

  1. Reduce the cap on monthly payments from 15 to 10 percent of discretionary income.
  2. Accelerate the time it takes for students’ loans to be forgiven from 25 to 20 years.

Here is an example of potential savings with this improved plan for a household of 1 with an income of $45,000/year and $60,000 in loans:

Standard Old IBR Pay as You Earn
Monthly Payment $720 $297 ($423 savings) $198 ($522 savings)
Amount forgiven N/A $156,927 after 25 years $139,769 after 20 years

To qualify for the “Pay as You Earn” program:

  • You must have taken out a federal student loan after October 1, 2007 AND have taken out at least one loan on or after October 1, 2011 (Private student loans do not apply).
  • Use the IBR calculator to determine if you are eligible for the Income Based Repayment Program.

The Department of Education estimates that at least 1.6 million borrowers qualify for the “Pay as You Earn” plan, but very few are aware that it exists, so spread the word and share this important information with your peers! Learn more about Income Based Repayment.

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10 Responses to “New Changes to Income Based Repayment – Pay as You Earn”

  1. Cathy says on May 16, 2013 at 1:09 am:

    I know this is an old post, but maybe someone will answer…

    Isn’t the amount forgiven (in your example above $139,769.00) then taxed on your income taxes at the end of the 20 year period? It seems too good to be true that you can just walk away from that much debt scot-free.

    Any thoughts would be great, as I am considering this if I dont get hit with a massive tax bill at the end of this period.

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  2. Shashi P. singh says on January 3, 2013 at 12:58 pm:

    I have student loan (nelnet apprx. $13000, at 7% interest). i have consolidated in 1996 or 1997. i needed to have lower interest rate, re-consolidation or forgiven. i am working for a non profit medical research institute and on the verje of retirement. i have a 7-year child to support. please help. thank you.

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  3. Heather says on January 2, 2013 at 5:48 pm:

    I am a FT employee for a public school district. Will this job qualify for the PSLF? I also just consolidated my loans to a Direct Loan (I had a bunch after 2006 of 65,000 I took for my terminal degree and a FFEL consolidated loan of 103,000). I went for the IBR repayment plan and it is estimated at 560 a month. How will this work for the 10-10 and the Pay as You Earn?

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  4. Brunetta Lewis says on December 22, 2012 at 4:24 pm:

    What if the students parent does not make 10,000 dollars a year because of disability? what does the student qualify for in this case. She as not been able to ge a get a job plus the out of state fees are out of this world eventho the school is only 4 hours away which is the same distance as so in-state colleges would have been. I would like my child experience to be wonderful like mines was but everything has changed so much. I am a divorcee and doing the best that I can with no help only a small amount of child support and living in this southern state of Alabama which I was Glad to send my daughter to Grambling University which was her first choice, but these HCBU are not making it at all a little easy financially for some of the students to attend. To me there is a double standard that needs to be looked into, but that’s just my opinion. I would never want to kill her dream but something has to be done for the lest fortunate kids I see going there and having leave the next term because like me cant get but one parent plus loan. Thank you.

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  5. TRACY says on December 21, 2012 at 1:44 pm:


    I wanted to know if I work for a non-profit, can my loans be forgiven after 10 years? And is it 10 years of paying the loans or 10 years working for a non-profit?



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  6. Tom Patrey says on December 21, 2012 at 9:25 am:

    This this apply to me if I still have a child in school, a Jr. at UNT? Also, I will 2 more in college next year, a total of 3 shildren in college. How does this apply? Thank you and very confused.

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  7. Tanya says on December 21, 2012 at 9:13 am:

    What about the parents in this same shape? We took out loans to sent our kids to school then lost jobs during the economic crisis and can’t afford the payments. Is there help on the way for us also?

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