On October 26, 2011, President Obama gave a speech in which he announced that he would be implementing a new Student Loan Relief Program.
There is understandably some confusion about what this actually means.
Here’s what it is: President Obama signed an executive order which modifies the features of the existing Income-Based Repayment (IBR) Program, for student loans issued in 2012 or later. In other words, any loan you took out before 2012 doesn’t get the new features. The new program is known as PAYE, or Pay As You Earn.
PAYE has two main differences from IBR:
1. Instead of the monthly payment being up to 15% of the discretionary income, under PAYE it can come down to 10%; and
2. Instead of requiring 25 years of repayment before the loans are forgiven, PAYE will reduce it to 20 years.
That’s it. Like IBR, PAYE will not apply to loans that are in default, private loans or Parent PLUS loans.