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November is always an anxious time for students who are pursuing higher education across the country. This is the time when the grace period is replaced by student loan payment structure. About a week ago, the Department of Education came up with the ‘Pay as you Earn’ plan for students.

The plan is certainly welcomed by almost all the students and their families. This is mainly because it is a income –driven plan. This way, the number of defaulters will reduce to a great extent as students will be required to repay the loan amount only once they start generating an income. The repayment will take place directly from their income which will again reduce default cases.

As per the ‘Pay as you Earn’ plan, students will have to shell out 10 percent from their income as a repayment loan amount. This percentage is lot lower than what it was previously. Students who go on repaying the amount for a period of 20 years will be granted forgiveness by the lender for the rest of the period. Currently, in order to avail forgiveness, a student has to go on repaying for a period of 25 years.

In order to be eligible to avail the ‘Pay as you Earn’ plan, a student must have taken his/her first federal loan after 30th of Sept 2007. Hence, the plan is certainly going to help recent and current undergraduates. It is going to provide the much needed relief from the pressure of student debt. More importantly, it will help hundreds of students by not entering the defaulters list.

However, the plan will only be applicable to students who own a lot of money as debt and their income is not good enough to repay the amount in a short span of time. You will need to have an income that is lot less as compared to the amount that you owe as loan debt. Students who are paying more than 10 percent of their income as loan installments are more eligible to be a part of the ‘Pay as you Earn’ plan.

Once a student enters the ‘Pay as you Earn’ plan, he/she will have to only shell out 10 percent of the income as debt. However, this facility will remain till the time his/her income is on the lower side. The moment the income goes up, the student will no longer be eligible for the plan. On the other hand, if the income of the student decreases further, the repayment percentage will also come down accordingly. Hence, at no point will the student be left stranded.

Higher educational experts and administrators across the country have praised the plan. Many experts believe that the plan is a wonderful initiative, especially in a situation where many students are backing away from enrolling in higher education due to lack of funds. With ‘Pay as you Earn’ plan, even students with minimum income will be able to seek education.