Example D

Pay As You Earn Repayment Plan

On December 21, 2012, the Department of Education announced the availability of the Pay As You Earn Repayment Plan for eligible Direct Loan Program borrowers.

If your student loan debt is high relative to your income, and depending on when you have taken out federal student loans, you may qualify for the Pay As You Earn Repayment Plan. The plan helps keep your monthly student loan payments affordable, and usually has the lowest monthly payment amount of the repayment plans that are based on your income.
Most Direct Consolidation Loans—except for Direct Consolidation Loans that repaid PLUS loans for parents—are eligible for Pay As You Earn.
The repayment plan selection section of the Federal Direct Consolidation Loan Application and Promissory Note available on this Web site has not yet been updated to include the Pay As You Earn Repayment Plan.
If you are interested in applying for the Pay As You Earn Repayment Plan, here’s what you will need to do:
1) In the repayment plan selection section of your consolidation application, you will select the Income-Based Repayment (IBR) Plan.

2) After your Direct Consolidation Loan has been made, you will receive welcome materials from the federal loan servicer that will service your consolidation loan.

3) Your servicer’s welcome materials will instruct you to contact the servicer for an evaluation of your eligibility for the Pay As You Earn Repayment Plan.

Complete information about the Pay As You Earn Repayment Plan is available on the Pay As You Earn Repayment Plan page of the StudentAid.gov Web site. This information includes a detailed explanation of the Pay As You Earn Repayment Plan, a list of eligible loans that may be repaid under the Pay As You Earn Repayment Plan, and a calculator that can be used to estimate your eligibility for and initial monthly payment amount under the Pay As You Earn Repayment Plan.

Thank you.