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What Obama’s Executive Order Means for Those with Older Student Loans

Obama's Executive Order Student Loans

President Obama’s recent executive order is welcome relief for the estimated 5 million Americans who received student loans prior to October 2007 or who have not borrowed since October 2011.

The order, signed this past June, expands coverage of the Pay As You Earn Repayment Plan (PAYE), which means that when the order goes into effect in December of 2015, eligible debtors can participate in this program regardless of when they took out their loans.

What is PAYE?

If you participate in PAYE, in general your payment amount will be about 10% of your discretionary income (which is the difference between your income and 150% of the poverty guideline for your family size and state of residence).

This program also has a repayment period of 20 years. After that, any remaining loan balance is forgiven.


To be eligible for the program, the new payment that you would be required to make must be less than what you would pay under a Standard Repayment Plan with a 10-year repayment period. Use the Repayment Estimator at the Federal Student Aid website to calculate approximately how much your PAYE loan payments would be.

Additionally, only certain types of loans are eligible for repayment under the PAYE plan. These include:

  • Direct subsidized loans
  • Direct unsubsidized loans
  • Direct PLUS loans made to graduate or professional students
  • Direct consolidation loans that did not repay any PLUS loans made to parents

Other types of loans are eligible if they have been consolidated into a direct consolidation loan, including:

  • Subsidized Federal Stafford loans (from the FFEL Program)
  • Unsubsidized Federal Stafford Loans (from the FFEL Program)
  • FFEL Plus Loans made to graduate or professional students
  • FFEL Consolidation Loans that did not repay any PLUS loans made to parents
  • Federal Perkins Loans

More information

There are several factors that you’ll need to consider when deciding if an income-driven repayment plan is right for you. See the US Department of Education’s student loan site for more information and to choose the best option for your situation.