Everyone else is doing it so I’ll join in with my praise of the new Pay As You Earn Plan. First, I rather call it the Pay As You Earn Repayment plan – it’s a better acronym – PAYER.
Now then, I really don’t have much praise for this plan. Don’t get me wrong, it’s a great thing – for those who qualify. What’s that I said? You have to qualify? Yes, yes you do. You see, while PAYER is IBR, there is a qualification that distinguishes who gets plain old IBR versus PAYER.
First, what is the difference, as in , why should we care? Well, the real difference is in the calculation and amount of repayment time. IBR uses a 15% figure and forgives any remaining balance after 25 years. PAYER, reduces the 15% to 10% and shortens repayment time to only 20 years. OK, this could be a big deal, but only to those who qualify.
And back to the main question, what is this qualification I speak of? PAYER is only for people who:
1) had no loan balance due as of October 1, 2007 (unless it was a new loan received on that very day),
AND
2) received a disbursement on or after October 1, 2011.
Guess what? That doesn’t do most of us student loan borrowers any good. Think about it – you had to have been in school on or after October 1, 2011 (that’s how you got a loan disbursement after that date) AND not have a balance due on a loan on October 1, 2007. If you graduated before October 1, 2011, you’re stuck with plain old IBR – 15% for 25 years.
But hey, as band-aids go, this new PAYER deal ain’t that bad – for those who qualify. It’s like Dodge bringing back the Dart – you scratch your head and wonder if the R&D money couldn’t have been better spent.