Penn State
Lewis Katz Building, University Park, PA
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A New Federal Student Loan Repayment Option

Another income-based federal student loan repayment option became available December 21, 2012. The Pay As You Earn (PAYE) option affords student loan borrowers the opportunity to have the monthly payment on their federal loans calculated as a percentage of available income rather than being dependent upon the amount borrowed. This will make a significant difference to borrowers with lower incomes and large federal student loan debt. 

The program is available only to those borrowers who did not have an outstanding Federal Stafford or PLUS Loan balance as of October 1, 2007, and who also received a new disbursement from a Federal Direct student loan on October 1, 2011 or later. Some graduates from the class of 2012 will likely be eligible to participate.

The amount of the payment is limited to 10 percent of the borrower’s discretionary income, so the resulting payment will be lower than on the Income Based Repayment Plan. After 20 years of on-time payments on the Pay As You Earn plan, the remaining federal loan balance will be forgiven. PAYE is also a qualifying payment plan for Public Service Loan Forgiveness.

Anyone who has questions about this program should contact their loan servicer or Susan Bogart, director of financial aid, at (814) 863-0469 or at




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