Five million more Americans can join a program to lower student-debt bills. It's part of a broad campaign the Obama Administration has provided to some households for relief but has previously done little.
Under the new rules, any American who borrowed directly from the federal government for college or graduate school can enroll in Pay As You Earn.
The program sets the monthly payment at 10 percent of a borrower's discretionary income, defined as adjusted gross income minus 150 percent of the poverty level.
Monthly payments typically drop by hundreds of dollars under the program but extend beyond 10 years to a maximum of 20 years for those with undergraduate loans and 25 years for those with graduate loans. Any remaining balances at that point are forgiven.
Since 2012, the program had been available to most of the 29 million Americans with direct federal loans, and enrollment has surged. The program initially excluded borrowers who took out loans before October 2007.
Officials say they are opening up the program to essentially cover all federal borrowers, excluding parents who financed their children's education.
Secretary of Education Ted Mitchell says, "We are targeting benefits to the neediest borrowers." More than 1 in 5 student loans are at least three months behind with a payment. About 7 million borrowers have gone at least a year without making a payment.
Balances forgiven after 20 or 25 years will be taxed as ordinary income, leaving some borrowers with big tax bills.
