US Student Loans Revise Repayments

Every country has a different set of criteria for repaying back their student loans. In the US, the Federal government have made an interesting change in the way in which those with outstanding student loans pay them back – stating that they can cap the repayments at 10% maximum of their disposable income. This reworked plan for repaying the student loan has been named REPAYE (Revised Pay As You Earn), and this is likely to make a massive difference to thousands of people struggling to live as well as pay back their student debt.

Who can benefit from this?

It is said that those who took out a student loan before October 2007 will benefit the most, although it is not clear that those who took out graduate and undergraduate loans, taken out since then, will not see the benefits too.

What does the new repayment plan look like?

This new REPAYE scheme means that only 10% of the borrowers disposable income will be taken. This revised way of paying back student loans, for those seeking the lowest repayments, means that for people earning over $17,655, their repayments would not exceed 10% of anything over this.

Can the student loan be written off?

There are in fact circumstances in which your student debt in the US can be written off, just as there are a few special circumstance in the UK also. This is referred to as Forgiveness. One of these circumstances under the new scheme is for those who work for a non-profit organisation, or who are employed in government – if the person works in this job for 10 years, and makes 120 payments over this time (1 per month) then the rest of the loan can be ‘forgiven’, ie – written off.

There are also instances where if a borrower pays payments for 20 years, all undergraduate loans will then be written off. Those who have graduate debt that they have consistently paid to for 25 years, will also have the remainder of their loan written off.

Does this apply to parents who have taken out loans for their children?

Unfortunately, for parents who have borrowed to pay for their children’s education, the REPAYE scheme can not apply. There is however the option of  an Income-Contingent Repayment option, which would see the repayments made by parents capped at 20% of their disposable income. This is still quite a reasonable repayment plan.


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