In 2012-13, about 700,000 families borrowed nearly $10 billion under the parent PLUS program, which has minimal credit requirements, no underwriting to determine the borrower’s ability to repay the debt and no cap on borrowing. Payments are capped at 20 percent of discretionary income with forgiveness after 25 years. Pay As You Earn has the same 10-year requirement for public service jobs but allows forgiveness after 20 years for other jobs.Ī third, less-generous option, the Income-Contingent Plan, is available for federal loan borrowers who do not qualify for the other two plans, including parents who shifted their PLUS loans into a direct consolidation loan on or after July 1, 2006. Borrowers with public service jobs can have their remaining balances forgiven after 10 years, while those in other jobs are eligible for forgiveness after 25 years. This program caps payments at 15 percent of discretionary income. Those borrowers are currently eligible for another, older program called Income Based Repayment, or IBR. The expansion to borrowers with older loans is expected by the end of 2015. 1, 2007, and who received a federal loan disbursement after Oct. The program is currently only available to those who were new borrowers as of Oct. Pay As You Earn caps payments at 10 percent of the borrower’s discretionary income, which is defined as the amount exceeding 150 percent of the poverty level for the household.
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