Office of Planning and Budgeting

“Pay As You Earn” Program Goes Live

The Department of Education released a set of final regulations today that will implement the new Income-Based Repayment provisions explained in our last blog post. Borrowers who took out student loans on or after October 1, 2011 will be eligible for the program. Borrowers who fall into that category, and who also took out loans on or after October 1, 2007, can retroactively include those loans in the new IBR plan.

The Department of Education acknowledges that there has been some concern about the plan, as the New America Foundation in particular has claimed it will help mostly high-income, high-debt borrowers and give universities incentives to keep tuition high. However, the department does not believe there is conclusive evidence that this is true and will be implementing the program as soon as possible, perhaps as early as this fall.

The new regulations also include a provision making it easier for borrowers who experience a “total and permanent disability” to discharge their student loans. Previously, borrowers with disabilities had to notify each sub-lender and guarantee agency separately. The new system will allow them to submit just one discharge application to the Department of Education.


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