Pay as you earn plan offers options for students struggling with financial aid debt


Raynalle Rouse will graduate from

West Virginia State University

in Institute, WV in May. Like many of her peers, she is feeling the weight of student loan debt resting heavy on her shoulders. 

“That is on my mind,” Rouse said. “That my debt is already messed up and I don’t even have any credit cards.” 

College graduates often struggle when it comes time to pay off those loans. It can seem impossible to get ahead. But an income driven repayment plan could be expanding this year. It could allow you to be free of student loan debt after 20 years.

“These kids get out and get married and they can’t buy a home because they have a huge debt,” said George Washington High School Guidance Counselor Kackie Eller. “You can’t get a car loan even because you have big debt.” 

The pay as you earn plan would allow qualifying students can make payments that are the equivalent of 10 percent of their discretionary income. After 20 years the remaining unpaid portion of their debt would be forgiven. 

“I recently put an article on the board where a young lady had gone through vet school and owed $400,000. Well in her life time she won’t be able to pay that off,” Eller said. 

Right now students who borrowed before October 2007 or haven’t borrowed since October 2011 cannot use Pay As You Earn. The expansion would allow borrowers who took out loans earlier to switch to the plan. 

That expansion could affect as many as 5 million students. 

Only certain types of loans qualify. Students can only use the plan if it makes their payments less than they would be under the standard 10 year repayment plan. 

There are some drawbacks to the plan though. The smaller payments mean students will be paying more interest over time. Under current Internal Revenue Service rules students may have to pay income taxes on the amount of money that is forgiven at the end of the 20 years. 

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