Potential Program to PAYE Off Student Loans
FARRAH LUU
Staff Writer
President Obama made an executive action to extend the Pay As You Earn (PAYE) program, a repayment process that pays off remaining student debts. If monthly payments are made over a minimum of 20 years, then the rest of the debt is forgiven and paid off by the federal government. As of now, 37 million Americans are in some kind of student loan debt. However, there are only 1.6 million people enrolled in this program. PAYE has the potential to help millions of Americans with their student debts, but it needs more support in order to be more effective.
PAYE needs to bring more awareness to their payment program. According to an article published on National Public Radio (NPR), the government has not promoted the expansion of the program to the point where a substantial number of borrowers are interested in enrolling. Because of the low enrollment in PAYE, the potential success of this program cannot be estimated with such a small fraction of people. Even though many were excited about the new plan, a lot of confusion arose over how PAYE will benefit them regarding their financial situation. If people do not know about PAYE, how are they supposed to sign up?
According to Money magazine, even President Obama believes that not enough people are aware of the options of PAYE. Instead of having people research the aspects and benefits of the program themselves, there should be brochures or catalogs mailed and given out for people to take. By discovering PAYE, those who are suffering from a student loan crisis may be able to terminate what they owe and the burden of excess student loans altogether.
By extending PAYE to cover federal student loans, an additional 5 million will be able to take part in PAYE. However, with a nation of 37 million Americans with loan debts, Obama has not expanded the program enough. For example, only about a quarter of public service workers apply for the program, according to NPR. People who have private student loans, parent plus loans or people with a higher average income cannot take advantage of PAYE. Although Obama has improved the program to benefit more people, there is still a great number of those who do not qualify. If his goal is to lower the amount of people in student debts, how is that supposed to be achieved if the program only enrolls a limited amount? It should expand to all types of student loans in addition to federal loans.
Additionally, loan company servicers, such as Wells Fargo, Bank of America or Citibank have been steering people away from PAYE. In order to enroll more customers into their own loan programs, these companies and banks hide the option of PAYE. Companies and banks feature their own programs’ benefits while PAYE is pushed to the back without being mentioned to the customer. However, the Department of Education plans to renegotiate its contracts with federal loan servicers to penalize company servicers who deny or postpone the assistance the person is seeking. If effective, companies and banks will not have the leisure of excluding PAYE.
PAYE needs to be promoted and brought to the attention of people who owe student loans. If PAYE is extended to cover all student loans, it will help alleviate the stress and burden caused by accumulating debt. Overall, PAYE is a payment program that could possibly become successful with the right resources, percentages and guidance.