FACT SHEET: Increasing College Access by Making Loans Easier to Pay

FACT SHEET: Increasing College Access by Making Loans Easier to Pay

March 18, 2016

Higher education continues to be the single most important investment students can make in themselves and the surest engine to enter the middle class. Since President Obama took office, he has made college affordability a top priority, recognizing the debts that far too many students face when they graduate from college. His historic investments in college affordability included increasing the maximum Pell Grant to the highest amount in the program's history, creating the American Opportunity Tax Credit giving families up to $10,000 over four years of college, and letting borrowers cap their monthly student loan payments at 10 percent of their income.

Today, U.S. Secretary of Education John B. King Jr. spoke with student reporters from colleges across the country. On the call, King explained the ways that the Administration supports college students on their path to graduation with loan repayment options that allow them to pursue their dream careers and successfully manage their loans.

Pay As You Earn & other income-driven repayment plans

Some of the most popular, and convenient, loan repayment options are income-driven repayment (IDR) plans. With these, borrowers set their monthly student loan payment at an amount based on income and family size. Nearly all borrowers with federal student loans are eligible for either the President's Pay As You Earn (PAYE) or another IDR plan. And most borrowers are eligible to cap their monthly loan payments at 10 percent of their income. The easiest way to enroll is to sign up here and select the box that says "I request that my loan holder (servicer) place me on the plan with the lowest monthly payment amount."

PAYE and other income-driven repayment plans can lower your federal student loan payments and provide help from burdensome student loan debt. Payments can be as low as $0 and those who are making responsible payments on their loans can have their debts forgiven after 20 years (10 years for those Americans who have dedicated their lives to public service, such as teachers and nurses). While PAYE and income-driven plans are great tools to help you manage burdensome student loan debt, if you can afford to pay more on your student loans you should. This will help you avoid paying more interest over time.

The Federal Student Aid (FSA) office is hosting a May 5 webinar from 3-4 p.m. on loan repayment. Those interested in learning about these plans and other FSA resources can sign up here.

Students who have taken out a loan can visit the Repayment Estimator to figure out their monthly payment. Other tools to help students determine where they should enroll and how much it will cost include:

Public Service Loan Forgiveness Program

For many college students, their dreams of working in public service, as a teacher, nurse, public health official, or at a non-profit organization comes with a worry that their salary will not be enough to allow them to pay back their loans and pay their bills. The Public Service Loan Forgiveness (PSLF) Program gives college students the freedom to pursue and remain in their dream public service jobs.

FSA will host a free webinar on PSLF on March 24 from 5-6 p.m. ET. RSVP here.

By combining income-driven repayment plans with this program, borrowers qualify for forgiveness of the remaining balance on their Direct Loans after making 120 qualifying payments on those loans while employed full-time by government and many non-profit employers. Here are the types of organizations whose employees may qualify for PSLF:

  • A government organization at any level—federal, state, local, or tribal
  • A not-for-profit, 501(c)(3) organization
  • A not-for-profit organization (that is not a labor union or a partisan political organization) that provides one or more of the following public services:
    • Emergency management
    • Military service
    • Public safety
    • Law enforcement
    • Public interest law services
    • Early childhood education (including licensed or regulated health care, Head Start, and state-funded prekindergarten)
    • Public service for individuals with disabilities and the elderly
    • Public health (including nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner occupations and health care support occupations)
    • Public education
    • Public library services
    • School library or other school-based services

To maintain eligibility, borrowers must be employed full-time by a qualifying employer and at the time they apply for loan forgiveness.

Protecting Students from Debt Relief Scams:

Fact: Borrowers never have to pay for help managing their federal student loan debt. There have been ads promising to help lower or forgive federal student loans. Many of these debt relief companies charge high fees for services that are available free of charge. It is always free for borrowers to:

  • Lower or cap their monthly loan payment;
  • Consolidate their federal loans;
  • See if they qualify for loan forgiveness;
  • Get advice on getting out of default.

If borrowers need help managing student loans, the U.S. Department of Education's loan servicers can help for free. Borrowers should always visit studentloans.gov or call their loan servicer, the company that collects their payments, for student loan assistance.