WASHINGTON, July 1 (UPI) -- A new repayment option for federal student loans went into effect Wednesday, tying payments to income and family size, the U.S. Education Department said.
A related program also offers benefits to graduates who work in public service jobs, the department said Wednesday in a news release.
"We know many graduates are concerned about their ability to repay student loans in the current economic environment," Education Secretary Arne Duncan said. "This new plan addresses the issue head on by giving them the option of a monthly payment tied to their income."
The Income-Based Repayment plan protects borrowers by linking payments to income and family size, the department said. Those with high student loan-to-income ratio likely would be eligible for the program, resulting in reduced monthly payments.
The lower payments could mean a repayment period longer than the normal 10 years, the department said.
Borrowers who work in public service also could be eligible for another benefit under the income-based repayment plan. After 10 years, any remaining loan balance may be canceled. This program is available only in the Direct Loan Program to borrowers making payments while working full-time in schools, government or many non-profit organizations, the department said.
