Hi Heather,

I wanted to share what I was told and I’m also wondering if you’ve heard any specifics regarding this new executive order? I pulled this from http://www.boston.com/business/personal-finance/2014/06/09/obama-signs-executive-order-aid-student-debt-holders/Ild7didv5NxeykoAPIhEvL/story.html (copy and paste this link because clicking on it may not work).

“President Barack Obama has signed an executive order that will allow millions of previously ineligible student debtors to qualify for the “Pay as You Earn” repayment program, which caps payments on student debt at 10 percent of monthly income and forgives outstanding balances after 20 years of repayments.

Obama’s order could open the benefit to as many as five million borrowers. Previously, in order to be eligible, borrowers could not have taken out loans before October of 2007, and could not have stopped borrowing before October of 2011. Earlier reports said the option will not become available to existing borrowers until December 2015.”

I’m one of those 5 million borrowers who this directly affects because I have one existing federal loan prior to 2007. The executive order supposedly takes away the “new borrower” clause and allows people who have loans prior to 2007 to qualify. I’m graduating this August and originally was going to skip the grace period and just start paying under the IBR (15%) plan because I’ll have a post-doctoral fellowship at a qualifying university institution. However, given this new information, I think I should just wait it out another 6 months because that’s less payments at 15% and more on the 10%.

I called the FedLoan Servicer people and the person I spoke with had no idea what I was talking about. However, he said that if this did come to fruition, then I’d have to effectively dis-enroll from IRB and enroll fresh into the PAYE payment plan once I’m eligible for it (supposedly after December 31, 2015), but that both sets of payments would count since they’re both qualifying plans. Anything I’m missing here?

Thanks,
Aaron

The main thing to understand is that the rules about the new PAYE are not yet determined.  They might be the same as the old PAYE, without the narrow requirements for when loans were borrowed, but they might be somewhat different.  You can’t know everything you’d want to know right now.  I’m concerned that there is the potential for fine print related to the new PAYE that we have to watch for/influence/interpret/understand.

Yes, both IBR and PAYE payments can be “qualifying” towards forgiveness, true.  In general, I think starting repayment sooner can save more than waiting to make payments based on a lower percentage of a higher (presumably) income, if we assume that your income will rise over time.  15% of today’s salary compared to 10% of tomorrow’s (larger) salary.  You can’t skip the grace period (unless you consolidate each loan with a grace period remaining which might have unintended consequences).  You can make payments during the grace period, but until you enroll in a repayment plan, those payments won’t count towards forgiveness.

BTW, my late husband’s name was Aaron.  Good name!

Thanks for the reply; guess we’ll have to wait and see how it shapes up. Good name indeed!