Federal Stafford Loan Repayment Options – Pay As Your Earn Repayment
Federal Stafford Loan Repayment Options – Pay As Your Earn Repayment
Just a reminder, this is the fifth blog in the series focusing on Stafford Loan Repayment. Last week we discussed the Income-Based Repayment. This week we will talk about the Pay as Your Earn Repayment, which is very similar to last week’s topic.
Borrowers who took out loans after 2008 and have a financial hardship are eligible to apply for this repayment plan. The monthly payments will be based on 10% of the borrower’s discretionary income, which is the difference between the borrower’s adjusted gross income and 150% of the federal poverty guideline. Similarly to the Income-Based Repayment, the typical monthly payments will be lower than with the Standard Repayment, and will not exceed the amount that a person would pay if they had chosen the Standard Repayment plan. After 20 years in repayment, any remaining principal or interest will be forgiven (borrowers may have to pay income taxes on that amount). Again, similarly to the Income-Based Repayment, borrowers who work in public service may qualify for loan forgiveness after 10 years.
| Loan Amount | Interest Rate | Number of Payments | Amount Each Month | Total Repaid Amount |
| $25,000 | 6.8% | Up to 300 | Will vary depending on income level | Will vary depending on repayment and possible forgiveness |
The advantages and disadvantages of this repayment option are similar to the ones outlined in the Income-Based Repayment blog.
For more information, please visit http://studentaid.ed.gov/repay-loans/understand/plans or contact your financial aid counselor.