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The U.S. Department of Education on Tuesday finalized the regulations carrying out President Obama's expansion of the government's most generous income-based repayment program to more federal student loan borrowers.
Starting this December, all federal direct loan borrowers will be able to cap their monthly payments at 10 percent of their discretionary income and have any remaining undergraduate debt forgiven after 20 years of making payments. Borrowers with loans from graduate school would have to make payments for 25 years.
Borrowers who took out federal loans within the past several years have already had access to a repayment program, Pay as You Earn, with virtually identical benefits.
But the Obama administration estimates that the new program, dubbed Revised Pay as You Earn, or REPAYE, will make some five million borrowers newly eligible for capping their payments at 10 percent of their income and receiving forgiveness after as early as 20 years of repayment.
Education Department officials estimated that two million borrowers will end up choosing to enroll in the new program, and they projected that expansion of benefits will cost $15.3 billion over the next 10 years.