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Student Loan Debt

By on July 12, 2014

President Barack Obama’s expansion of an income-based repayment program offers additional help for millions of Americans struggling with federal student loan debt. Some of the most burdened borrowers, however, will get little if any relief, financial aid experts said.

Private student loans and parent PLUS loans are not eligible for income-based options, and borrowers with huge debt loads can be shut out if their incomes are too high.

“You could really be struggling and still not qualify for one of these programs,” said Deanne Loonin, director of the National Consumer Law Center’s Student Loan Borrower Assistance Project.

Obama’s executive order extends the Pay as You Earn repayment program to about 5 million more borrowers with older loans. Pay As You Earn caps payments at 10 percent of the borrower’s discretionary income, which is defined as the amount exceeding 150 percent of the poverty level for the household.

The program is currently only available to those who were new borrowers as of Oct. 1, 2007, and who received a federal loan disbursement after Oct. 1, 2011. The expansion to borrowers with older loans is expected by the end of 2015.

Those borrowers are currently eligible for another, older program called Income Based Repayment, or IBR. This program caps payments at 15 percent of discretionary income. Borrowers with public service jobs can have their remaining balances forgiven after 10 years, while those in other jobs are eligible for forgiveness after 25 years.

Pay As You Earn has the same 10-year requirement for public service jobs but allows forgiveness after 20 years for other jobs.