EagleTribune.com, North Andover, MA

January 20, 2013

Students get a break on loan repayment

Program caps student loan payments at 10 percent of income

By Doug Ireland

---- — When Jillian Barrett starts classes at the University of New Hampshire this week, the freshman transfer student will have to make a lot of adjustments.

The 18-year-old Pelham woman will find herself getting used to a new campus, new classmates — and a much bigger college tuition bill.

She will be paying $14,000 to attend UNH this semester, compared to about $2,000 last semester at Middlesex Community College.

Barrett and her family now find themselves footing much more debt and will continue to do so after she graduates.

It’s because of students such as Barrett and thousands of others across the country that the federal government recently introduced Pay As You Earn, a new student loan program.

Pay As You Earn allows those eligible to cap their monthly student loan payments at 10 percent of their discretionary income and for remaining payments to be forgiven after 20 years, according to the U.S. Department of Education. The program is expected to benefit an estimated 1.6 million borrowers.

Previously, loan payments were limited to 15 percent of discretionary income, with remaining debt forgiven after 25 years.

Barrett said she already has a $5,500 federal Stafford loan. But she welcomes any program that would help reduce her financial burden.

“I’ll definitely take a look at it,” she said. “It sounds pretty good seeing that taxes are going up in Washington and they’re taking more out of paychecks.”

Barrett, a 2012 Pelham High School graduate, thought she had her college career carefully mapped out.

She was accepted at the University of Massachusetts Lowell, but opted for Middlesex because the two-year school was much more affordable.

But getting into Middlesex’s recreation management program was much tougher than Barrett thought, so she enrolled at UNH and plans to become a therapist.

“It was a three-year wait and they take Massachusetts students before they take New Hampshire students,” Barrett said.

But UNH is much more expensive. She is a part-time receptionist at Merrimack Sheet Metal in Methuen, but had to give that up since she leaves today for Durham.

“I just wrote a $7,000 check for this semester,” Barrett said Friday.

Few know about the program

With many colleges in New Hampshire and Massachusetts just returning to classes this week, word of the program is just getting out, according to school officials. The program began Dec. 21

One person who is helping spread the word is U.S. Sen. Jeanne Shaheen, D-N.H.

Shaheen participated in a roundtable financial aid discussion last week at UNH Manchester. The senator outlined the benefits of Pay As You Earn during the discussion, which included students and financial aid experts, according to Jodi Abad, associate director of financial aid at UNH Manchester.

“She’s quite an advocate,” Abad said of Shaheen. “We were glad to have her here.”

Abad said the school will start introducing the plan to students, saying the cap on payments will certainly benefit graduates beginning their careers.

“Like with any repayment option, we want to put the information out there for students,” she said.

To qualify, borrowers must have started taking out federal loans after Oct. 1, 2007 and must have received a loan disbursement after Oct. 1, 2011. They must also qualify for “partial financial hardship.” The program only applies to federal loans.

Officials at several other area colleges — Northern Essex Community College, Manchester College and NHTI in Concord — said they are just learning about the program and will spread the word to students.

Shaheen is touting the program because she believes it will benefit those in low-paying public service jobs, such as teachers and emergency personnel.

“The Pay As You Earn program simply makes it easier for eligible recent graduates to lower their monthly student loan payments,” Shaheen said in a statement Friday. “That objective couldn’t be more important right now, particularly as our economy continues to recover from one of the worst recessions we’ve seen in generations.”

The new program comes at a time when New Hampshire has the dubious distinction of having the highest average student debt load in the country for the seventh year in a row, according to The Institute for College Access & Success.

The institute announced this fall that students who graduated from New Hampshire colleges in 2011 owed an average of $32,450 in loans. Massachusetts ranked 14th on the list at $27,181; the nationwide average was $26,600.

Shaheen said high student loan debt shouldn’t prevent students from pursuing certain career goals. She said capping monthly payments at 10 percent of discretionary income should help ease some financial burden.

Tara Payne, vice president of college planning for the New Hampshire Higher Education Assistance Foundation, said the program will certainly lessen the financial stress on recent college graduates.

“This is a step in the right direction,” she said. “Hopefully, this is a help for people beginning in their careers.”

Payne said the program is ideal for students who enter low-paying fields and plan to remain in those careers for a long time.

“In many ways, these programs are intended for a person who starts off in a social service program and plans on staying in it,” she said.

Otherwise, their payments will increase sharply if they switch to a higher-paying field or get married. Payments are based on total household income, she said. Payne recommends borrowers stay in close contact with their loan provider.

College officials aren’t the only financial aid experts just learning about the program. High school guidance counselors are just receiving word as well, including Londonderry High School guidance director Michael Dolphin.

Dolphin criticized Pay As You Earn because students must have a financial hardship to benefit, and he thinks a lot of students won’t qualify.

Reduced state funding for New Hampshire’s college and university system has made it difficult for many to pursue higher education, Dolphin said.

“No one ever said the students are the most important thing in this state,” he said. “Let’s do something more than just help the hardship kids.”

For more information on Pay As You Earn, go to