Total student loan debt in the U.S. has topped $1 trillion for the first time, the Federal Reserve reports.
And here’s another startling statistic from the Fed: the average U.S. college student has $33,607 in loans. That is twice the debt of the average U.S. household ($15,191, excluding mortgages).
Before we look at this closer, remind yourself of this if you have a student loan or loans: Theyrepresent an investment and opportunity – to gain knowledge and skills for a career you want, to earn more than those who don’t have a degree. Your education will pay dividends, in various ways, for the rest of your life. That’s the good part of having student loans.
Now, let’s look at the rest of it.
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There are a number of Federal student loan repayment plans available to recent college graduates who have student loan debt.
The newest option is called Pay As You Earn. If you just graduated from college and don’t have enough money for your monthly payments, this option may let you pay less each month than other income-based plans. It also may help you if your student loan debt is high in relation to your income.
Pay As You Earn isn’t a choice for most people who’ve begun repaying their Direct Loans. If you’re in that group, you may want to consider the income-based repayment plan.
Today, we’ll look at what Pay As You Earn is, whether you might qualify and which Federal student loans are eligible.
In the second part of this two-part series, we’ll look at the program’s requirements, and its advantages and disadvantages.
What Is Pay As You Earn?
If you qualify, make on-time monthly payments for 20 years and meet some other requirements, what’s left of your student debt after 20 years is forgiven.